Simple Forex Pivot Points Strategy

The Daily-Pivot-Points.ex4 indicator can be used to design several trading strategies.

The strategy described in one of the earlier articles used the blue pivot line as the focal point of the trades.

This time around, we will see how this indicator can present trade opportunities using any pivot point available.

Chart Setup

  • MetaTrader4 Indicators: Daily-Pivot-Points.ex4 indicator (default setting).
  • Preferred Time Frame(s):  1-Hour.
  • Recommended Trading Sessions: Any time. Depends on when the indicator signal appears on the chart.
  • Currency Pairs: any

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Strategy

The pivot points plotted by the indicator will serve as areas of support and resistance.

This time around, any pivot point can be used. This serves up more opportunities than merely using the blue pivot line.

The key is to use the behaviour of the price candles at the pivot to determine whether to buy or to sell.

Sell Example (click the image for full size):

profitable-forex-pivot-points-strategy

LONG ENTRY RULES

A long position is initiated when the following is displayed on the chart:

  • Price candle takes off from the brown pivot line, which is a pivot support. Usually, the previous candle would have bounced off this line, so the key to the trade is to allow the bounce to occur, then trade at the open of the next candle.
  • If the candle that performs the bounce closes high up above the pivot support, then it would be wise to allow a slight pullback to the line before initiating the long entry.

Stop Loss for Long Entry:

≥5-30 pips below the pivot support 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 pivot support (the yellow pivot) is the nearest 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.

SHORT ENTRY RULES

This time, we look to trade price move downwards from the green pivot line, which is the  pivot resistance.

  • Usually, price would have been rejected at the pivot resistance line. Once this occurs, you can initiate a short trade at the open of the next candle.
  • A Sell Limit entry is used if the previous candle’s close is several pips below the pivot resistance after that candle has tested the pivot without breaking it.

Stop Loss for Sell Entry

≥5-30 pips above the resistance pivot 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 resistance pivot should be used as the Take Profit. However, the candle broke the yellow pivot line. Therefore the next TP target should be the brown support pivot line.

The chart displays the trade setup for long and short entries.

About The Trading Indicator

By throwing up several pivot points which could be used as key areas to setup trades as well as exit trades, the daily-pivot-points.ex4 indicator is an important indicator which could potentially help traders become more profitable.

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