Daily Pivot Points Forex Strategy
The Daily-Pivot-Points.ex4 indicator can be used to design several trading strategies.
The strategy described in this article is one of them.
The Daily-Pivot-Points.ex4 indicator can be used as a standalone indicator.
This is an intraday system which seeks to trade off the blue pivot, acting either as a support or resistance, depending on where price is coming from.
- MetaTrader4 Indicators: Daily-Pivot-Points.ex4 indicator (default setting).
- Preferred Time Frame(s): 1-Hour.
- Recommended Trading Sessions: Any time.
- Currency Pairs: any
The indicator plots pivot points which will serve as areas of support and resistance.
Of special interest is the blue pivot line.
This is the line which will be used as a support or resistance, enabling the trader to buy or sell the currency pair respectively.
Buy Example (click the image for full size):
LONG ENTRY RULES
A long position is initiated when the following is displayed on the chart:
- Price candle takes off from the blue pivot line. Usually, the previous candle would have closed above this line, so the key to the trade is to wait for a possible pullback to this line. This is the situation seen in the chart.
- The breakout candle closes well above the blue pivot, so it would be better to wait for a pullback before the long entry. A more appropriate entry would be a Buy Limit trade, using the price at the blue pivot as the entry price.
Stop Loss for Long Entry:
≥5-30 pips below the blue pivot line on which trade entry is based.
Exit Strategy/Take Profit for Long Entry:
Knowing when to exit a trade is key and this can be achieved as follows:
- The next pivot line above the blue pivot (the yellow pivot) is the 1st TP point. However, if the price candle’s move is so strong as to break this line and close above it, then the next pivot above becomes the new profit target. This is the situation seen on the chart.
- If the next pivot target is broken by price action, you can apply a trailing stop to protect profits and follow the trade to the next pivot area.
SHORT ENTRY RULES
This time, we look to trade price move downwards from the blue pivot line.
- Usually, price would have broken the blue pivot line previously. Allow the price action to pull back to the blue pivot.
- A more appropriate trade entry in this scenario is a Sell Limit trade. This is set using the blue pivot as the entry price.
Stop Loss for Sell Entry
≥5-30 pips above the intraday short line.
Exit Strategy/Take Profit for Sell Entry
The exit strategy on a short position should be to use the pivot lines below th blue pivot.
- Naturally, the first pivot line below the blue pivot is the 1st TP target (TP1).
- Sometimes, the move may be very strong and will break that pivot. In this chart, the pivot was broken by strong bearish movement, so the next pivot is used as the 2nd TP target (TP2).
About The Trading Indicator
This indicator is a simple indicator with boundless opportunities. There are many opportunities to use the daily-pivot-points.ex4 indicator. This strategy, which focussed on just the blue pivot line, is one of them.