Pivot Points Analysis & Pivot Point Signals
This indicator consists of a central pivot which is surrounded by 3 resistance areas above and 3 support levels below.
Initially these points were used by floor traders to analyze and trade the equities & futures exchange markets. This technical indicator is considered to be leading rather than lagging.
Pivots provide a quick way for forex traders to analyze the general trend of how the market is going to be moving during the course of the trading day. A few simple calculations are used to plot the resistance and support levels.
To calculate these points for the coming trading day is the previous day's
- high,
- low, and
- close prices are used
The Forex trading day closes at 5:00PM EST this daily market closing time is when the technical indicator is updated.
The 24-hour cycle for this indicator are calculated using a complex formula. The central pivot is then used to calculate the support & resistance zones as follows:
Resistance 3
Resistance 2
Resistance 1
Pivot Point
Support 1
Support 2
Support 3
Forex Analysis & How to Generate Trading Signals
This indicator can be used in different ways to generate Forex signals. The following techniques are the most common technical analysis:
Trend Identification Signals
The central pivot is used by traders to determine the general market trend direction. The trades taken will only be in direction of the market trend.
- Buy signal - price is above the center pivots point
- Sell signal - price is below center pivots point
Price Breakout Signals
Price breakout trading signals are generated as follows
- Buy signal - is generated when price breaks-out up-ward through the central point.
- Sell signal - is generated when price breaks out downward through the central point.
Price Breakout
Price Reversal Signal
Price reversals are generated as follows
Buy Forex Signal- when the price moves down toward one of the support area, then touches support or moves just slightly through it then quickly reverses and moves upward.
Sell Trading Signal- when price moves up toward one of the resistance level, then touches the resistance or moves slightly through it then quickly reverses and moves downward.
Price Reversal Signal
Setting Stop loss & Limit Profit Values
The central pivot & the other support and resistance zones are used by traders to determine suitable stop loss & limit profit levels.
Setting Stop loss & Limit Profit
If a buy is placed above the central point the Resistance 1 or Resistance 2 can be used to set the take profit level, & the Support 1 can be set as a StopLoss Level for the trade.
To download Pivot points technical Indicator:
https://c.mql5.com/21/9/pro4x_pivot_lines.mq4
Once you download it. open it withthe MQL4 Language MetaEditor, Then Compile the indicator by clicking Compile Button & it will be added to your Meta Trader 4 Trading Software.
NB: Once you add it to your Meta Trader 4 Trading Software, the indicator has extra lines referred to as MidPoints, to remove the extra lines open MQL4 MetaEditor(short cut key-board key - tap F4), & change line 16 from:
Extern bool mid-pivots = true:
To
Extern bool mid-pivots = false:
Then Press Compile Button again, & it will then appear as shown on this site.