Forex Pivot Points:
Using Forex pivot points is a strategy for predicting where the market will be heading. These calculations can be made using the previous day’s high, low and close figures. If you are a swing trader the daily pivots will be the figures that you are interested in. If you are an intra day trader, you may want to investigate 4-hour pivots.
The whole idea of using pivot points has actually been around for some time. It was a system that was used by floor traders to easily predict where the market was heading. It is now used by people who trade from the comfort of their home.
One important factor about trading using Forex pivot points is that many traders use them. This often leads to there being levels in the market where traders take action. Knowing this information in advance can give you a competitive edge over the trader who is merely reacting to information that is coming in.
A pivot point is generally seen as a point where things change. In the world of Forex, this is generally taken as being the main level of resistance and the main level of support. By knowing these values, you can then make a prediction of where the market is heading. For instance, you may find that if you are following the GBP/USD currency pair and the market breaks through your predicted pivot point, trading after that point would show much less support or indeed there could be a reversal.
If you have calculated your Forex pivot points correctly you are likely to see that the bulk of the day’s trading occurs between your predicted pivot points. As with any new strategy it is recommended that you initially try it out, maybe paper trading for a time before you risk any real money on it.