subject: Trade Forex With Pivot Point Analysis [print this page] Trade Forex With Pivot Point Analysis
pivot point trading depends on determining several levels for the currency price. these currency can go beyond that level for a long period. if it goes beyond that level, then we say that breakout has been occurred.
there are generally two types of levels for the currency price that are monitored when trading forex. the first type is called support level. the second type is called resistance level. the support level is a level the currency price cannot go below it for large period. the resistance level is a level the currency price cannot go above it for a large period.
when trading forex, the above levels can be put on the chart such that when the price goes to one of these levels, the trader can expect that a reverse will occur. the pivot point trading give us with detailed view for the support and resistance levels. it gives three levels for the support and other three for resitance. the resistance levels are called r1,r2,r3. the support levels are called s1,s2,s3
the levels s1 and r1 are the strongest levels for the price. thus breakout is more difficult to occur at these levels. thus the currency price is more likely to reverse at these levels.
when the price reaches the resistance levels, the forex trader can go short. similarly, when the price reaches the support levels, the forex trader can go long. other indicators can be used with pivot point analysis to confirm that the price will reverse. for example, the trader can use the stochastic to determine that the price is overbought or oversold.
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