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Traders use pivot points to get in and out of a trade. Each day has an open, close, high and low that is used to create the Standard pivot point. Using this data from the previous day, traders calculate the potential points at which the trade may turn for the current day.
Standard Pivot Points
One of the most commonly used pivot points is the Standard Pivot Point. It can be used in a few ways depending upon the trader.
- Daily Pivot Points– This kind of pivot point are useful for a trader when he is swing trading. If his trade is going to be restricted to just a couple of trades per day, this will be useful. The trader can determine his entry and exit point depending upon the high point, low points and closing points on the previous day.
- 4-Hour Pivot Points – The 4-hour pivot point is used by intraday traders. They are calculated by using the data available for the previous 4 hours. It is for traders who trade frequently and need the data to know if they have to get out or in during the next four hours. As the pivot points are more, the number of exit and entry points is more too.
- Long Term Pivot Points– These pivot points give the trader an idea of where the main support levels and resistance levels must be placed. There are many traders using pivot points and each of them gets the same results. When there are so many traders getting the same support level and resistance level, then the points will hold.
Other Pivot Points
Apart from these, there are other technical pivot points such as Fibonacci pivot points, Woodie’s Pivot points, Camarilla Pivot points and DeMark’s Pivot points. The strategy used depends upon the trader and the pivot point with which he is comfortable. They are all at par and can be interchangeably used. Like the Standard pivot points, the factors taken into consideration are the support levels and the resistance levels.
Many traders believe that the best way to trade is in mid-trend. It is further believed that when there is a pivot point, you must wait for a new trend to start. But Forex trading is all about what works for you and what you are comfortable with. These pivot point in currency trading are just guidelines to help you pick your way through trends.
