Traders use pivot points to determine where potential support and resistance levels are. Pivot points are interesting to use, because they are relatively simple to implement, but also because of their objectivity.
Using Pivot Points with Logic
Using pivot points is especially useful for short-term traders who are looking for small price movements. When a price approaches, you can choose to to trade the bounce or break of these levels. Pivot points work really well in very volatile and liquid markets, so they are ideal for trading forex. You can use them to determine the levels of potential entry, stops and take profit.
Why Using Pivot Points works
The main reason why they work is that most retail trades, institutional traders, investors and banks use and trust pivot points. Pivot points can be used as an important measure of strength or weakness in a currency pair. Pivots can also be extremely useful trading ranges or channels since many currency pairs usually fluctuate between these levels.
Do pivot points work all the time? The answer here is no. Just like any other tool, strategy or indicator, you need to use additional tools and gain knowledge of trading the market.
Final Words
Because of the their sheer simplicity, pivot points definitely are a useful tool to add to your trading toolbox. It allows you to see possible areas that are likely to cause a price reaction. You’ll become more in sync to market movements and make better trading decisions. And as mentioned before in this article, using pivot point analysis alone is not enough. Educate yourself in other trading tools to, to reach the maximum of your capacities.
Watch the video above for the full lesson so you can continue to enhance your skills and be better everyday.
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Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.
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