How to trade the pivot point

Breakout Trades
The pivot point should be the first place you look at to enter a trade, since it is the primary support/resistance level. The biggest price movements usually occur at the price of the pivot point.

Only when price reaches the pivot point will you be able to determine whether to go long or short, and set your profit targets and stops. Generally, if prices are above the pivot it’s considered bullish, and if they are below it’s considered bearish.

Let’s say the price is hovering around the pivot point and closes below it so you decide to go short. Your stop loss would be above PP and your initial profit target would be at S1.

However, if you see prices continue to fall below S1, instead of cashing out at S1, you can move your existing stop-loss order just above S1 and watch carefully. Typically, S2 will be the expected lowest point of the trading day and should be your ultimate profit objective.

The converse applies during an uptrend. If price closed above PP, you would enter a long position, set a stop loss below PP and use the R1 and R2 levels as your profit objectives.

Range-bound Trades
The strength of support and resistance at the different pivot levels is determined by the number of times the price bounces off the pivot level.

The more times a currency pair touches a pivot level then reverses, the stronger the level is. Pivoting simply means reaching a support or resistance level and then reversing. Hence, the word “pivot”.

If the pair is nearing an upper resistance level, you could sell the pair and place a tight protective stop just above the resistance level.

If the pair keeps moving higher and breaks out above the resistance level, this would be considered an upside “breakout”. You would also get stopped out of your short order but if you believe that the breakout has good follow-through buying strength, you can reenter with a long position. You would then place your protective stop just below the former resistance level that was just penetrated and is now acting as support.

If the pair is nearing a lower support level, you could buy the pair and place a stop below the support level.

Daily Pivot Trading

PIVOT TRADING

Online Forex trading thereby involves simultaneous buying of one currency and selling another in an over the counter manner.
Currency are traded in pairs e.g.
EUR/USD, USD/JPY, GBP/USD.
It is a true 24-hour market, starting from Sydney to Tokyo, then London and finally New York and on like any other financial market it offers opportunities to investors to respond to currency fluctuations caused by economic, social and political events at the time they occur- day or night.

PIVOT POINT
Pivot Point was developed to know where the price is at every point in time. This is so because before the advent of the internet the traders has to rely on the pivot point to trade. It is not technical analysis but work it like it. Because it serves like radar or compass to let you know where the price is at the time you are checking it. Pivot Point is very useful technique that uses previous bar’s high, low, close to project the support and resistance for the current bar.
Pivot Point have two cardinal points.
SYMBOL.
1. RESISTANCE: R1 R2 R3
2. SUPPORT: S1 S2 S3


RESISTANCE is referred to as “CEILING”, while SUPPORT is referred to as “FLOOR”
When the price is at “R3” it will be coming down because it has the highest high the seller will force it down.
If it at “S3” it will start going up because the buyers will force it up

DAILY RANGE
This show the market movement within a day. The difference between the highest and the lowest. It tells about the market volatility and stability. Currency pairs volatility and stability differ. Some pairs may move between 90-180 pips a day, while some may be 70-120

RESISTANCE AND SUPPORT

When the price breaks through either support or resistance, it likely to continue in that direction for some time. Always wait for the price to close above the resistance or beneath the support before taking a position


Support and Resistance
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Support and resistance is one of the most widely used concepts in trading. Strangely enough, everyone seems to have their own idea on how you should measure support and resistance.
Let’s just take a look at the basics first.
Look at the diagram above. As you can see, this zigzag pattern is making its way up (bull market). When the market moves up and then pulls back, the highest point reached before it pulled back is now resistance.
As the market continues up again, the lowest point reached before it started back is now support. In this way resistance and support are continually formed as the market oscillates over time. The reverse of course is true of the downtrend.
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Plotting Support and Resistance
One thing to remember is that support and resistance levels are not exact numbers. Often times you will see a support or resistance level that appears broken, but soon after find out that the market was just testing it. With candlestick charts, these "tests" of support and resistance are usually represented by the candlestick shadows.

Notice how the shadows of the candles tested the 2500 resistance level. At those times it seemed like the market was "breaking" resistance. However, in hindsight we can see that the market was merely testing that level.
So how do we truly know if support or resistance is broken?
There is no definite answer to this question. Some argue that a support or resistance level is broken if the market can actually close past that level. However, you will find that this is not always the case. Let's take our same example from above and see what happened when the price actually closed past the 2500 resistance level.

In this case, the price had closed twice above the 2500 resistance level but both times ended up falling back down below it. If you had believed that these were real breakouts and bought this pair, you would've been seriously hurtin! Looking at the chart now, you can visually see and come to the conclusion that the resistance was not actually broken; and that it is still very much in tact and now even stronger.
So to help you filter out these false breakouts, you should think of support and resistance more of as "zones" rather than concrete numbers. One way to help you find these zones is to plot support and resistance on a line chart rather than a candlestick chart. The reason is that line charts only show you the closing price while candlesticks add the extreme highs and lows to the picture. These highs and lows can be misleading because often times they are just the "knee-jerk" reactions of the market. It's like when someone is doing something really strange, but when asked about it, they simply reply, "Sorry, it's just a reflex."
When plotting support and resistance, you don't want the reflexes of the market. You only want to plot its intentional movements.
Looking at the line chart, you want to plot your support and resistance lines around areas where you can see the price forming several peaks or valleys.

Other interesting tidbits about support and resistance:
When the market passes through resistance, that resistance now becomes support.
The more often price tests a level of resistance or support without breaking it the stronger the area of resistance or support is.

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