How to Use Pivots Points for Day Trading - Forex Trend Indicators

How to use Pivot Points indicator in day trading forex - learn how to analyze Pivot Points Levels and how to trade Pivot Points Reversal signals explained.

Pivot Points are used by traders to find support and resistance levels based on the previous day's price action.

This Pivot Points indicator is a very useful tool that use the previous bars' highs, lows and closings to project support & resistance levels for future bars.

Pivot Points indicator provides an idea of where key support and resistance should be. Place the pivot points on your currency charts and price will bounce off one of these levels. These levels are used by investors to determine market tops, market bottoms or trend reversals.

• Daily pivots points are calculated from previous day's high, low, close which ends at 5.00pm EST(2100 GMT)

This indicator is shown below

Technical Analysis in FX Trading

The central pivot itself is the primary level, which is used to determine the trend

The other support & resistance levels are also important in calculating areas that can generate significant market movements.

This indicator can be used in 2 ways

The first way is for determining overall Forex trend: if the pivot point is broken in an upward movement, then the market is bullish, and vice versa. However, pivot levels are short-term trend indicators, useful for only one day until they need to be recalculated.

The second method is to use these points to enter and exit the markets. This indicator is a useful tool that can be used to calculate the areas that are likely to cause price movement.

These points should be used conjunction with other forms of technical analysis such as Moving averages, MACD and stochastic oscillator.

This indicator can be used in many different ways. Here are a few of the most common methods for utilizing them.

Trend Direction: Combined with other technical analysis techniques such as overbought/oversold oscillators, volatility measurements, the central point may be useful in determining the general trending direction of the currency exchange market. Trades are only taken in direction of the Forex trend. Buy signal occurs only when the market is above the central pivot and sell signal occur only when the market is below the central pivot.

Forex Trading Price Breakouts: A bullish signal occurs when the market breaks up through the central pivot or one of the resistances (typically Resistance 1). A bearish signal occurs when the market breaks down through the central point or one of the supports (typically Support 1).

Forex Trend Reversals:

• A buy signal occurs when the price moves toward a support level, gets very close to it, touches it, or moves only slightly through it, and then reverses and moves back in the opposite direction.

• A sell signal occurs when the price moves toward a resistance level, gets very close to it, touches it, or moves only slightly through it, and then reverses & moves back in the opposite direction.

Stop loss and/or Limit Profit Values Determined by Support/Resistance: This indicator may be potentially helpful in determining suitable stoploss &/or limit profit placements. For examples, if trading a long break out above the Resistance 1 it might be reasonable to position a stoploss.

Combining with Moving Average Crossover System

A good indicator to combine and trade reversal signals is the moving average crossover which can be used to confirm the direction of a reversal signal.

An investor can then open an order once these 2 indicators give a trading signal in the same direction.

Moving Average Crossover Technique

Moving average crossover method that can be combined with this indicator to come up with a trading system for generating buy & sell signals.

To download Pivot points:

https://c.mql5.com/21/9/pro4x_pivot_lines.mq4

Once you download it open it with MQL4 Language Meta Editor, Then Compile the technical indicator by pressing the Compile Button & it will be added to your MT4.

NB: Once you add it to your MT4, the technical indicator has additional lines named Mid-Points, to remove the additional lines open MQL4 Meta Editor(shortcut keyboard key - press F4), & change line 16 from:

Extern bool midpivots = true:

To

Extern bool midpivots = false:

Then Press Compile again, and it will then appear as exactly illustrated on this web site.