Having a hard time understanding pivot points

Beginner Questions
#1

So I went through school and read the section regarding how to use pivot points SEVERAL times and I’m still confused about how to use pivot points.

Suppose I start a pivot point (using FXCM Market Scope), do I base it off of day, 60 min, 30 min, 15 min, etc.?

How do you know where the price will go? Suppose it’s going up to R1, how is this a reference to go long (buy)? I’m generally having a hard time understanding how to rely that the movement of the candle stick toward a R or S of the PP to initiate a move in the market.

So I went into Market Scope and brought up the USD/JPY info. I started a day PP for 5/21/09 and could see how the market dropped below the first S1.

Next at 30 min time intervals I started a new PP for time 20:00 (to show the 20:00-20:30 movement). I see the candle stick move up and the whole PP lines move up as the candle stick moves up from ~93.900 to over ~94.000.

I’m having a hard time making sense of how to use the PP. Anyone have some helpful insight?

#2

Hey learner,
So first off, the pivots absolutely suck in FXCM’s trading station. I have not found a way that I can create a daily pivot and have it show on all of the time frames. There is a custom indicator, but you have to manually enter the values. MT4 has many more options including some that shift the time scale if you would prefer to use a different GMT offset than your broker provides.

Now, back to your questions.

I am not really sure how the school says to use them but in general I think people usually use pivots based on daily candles. There are many ways to play pivots. Some say that if the price opens above the pivot then it will be an up day. Others wait for the price to hit pivot then wait for a bounce/reversal, usually using some sort of candle stick formation or other technical analysis to help signal the reversal or continuation. Me personally, I enjoy using them for intra-day trades as a T/P or S/L point once momentum moves the price towards it.

One thing to keep in mind, because of the different broker hours, the pivots may be different. I like fxstreets pivots and also use GMT0 as my day start for my MT4 charts. I have noticed that the pivot line is by no means and exact point, I usually give 15 points on each side as my “pivot zone”, depending on the other S/R and round numbers in the area.

Finally, realize that pivots are not inherently valuable as they are just another formula (PP=(H+L+C)/3). I feel they only work because a good amount of people use them, like a self fulfilling prophecy. That being said, take a look at a 15 or 30 minute chart and you will see that price does tend to gravitate to them.

#3

Thanks for the response husky_1. Unfortunately I can’t use MT4 yet due to starting a FXCM Micro for now. I’ve been able to actually make money and am close to the $2,000 minimum for the FXCM account that allows one to use MT4. As of now I downloaded and tried to use MT4 but it keeps saying invalid account, went back to the FXCM site and read the requirements and it seems to make sense why I can’t use it for now.

After a lot of goofing around with it for past hour or so, the problem I was having is that the current candle stick should be used to the last PP. With the MS2 (Marketscope 2) software I would make a PP and it would be for the current candle stick which was making me go crazy trying to understand it as it would keep changing.

Without using the PP I’ve been in the profit side with my fair share of losses, but I’m looking to expand my market observing tools and read that PP are a good option.

#4

Hey Learner,
Congrats on your successes so far.

I would not worry so much about getting MT4 on a live account. Instead you can do like some others do, and figure out your setups in MT4 (through a demo) and then place your orders in FXCM’s trade station.

Here is a link to FXCM’s MT4 demo; MetaTrader 4| Meta Trader - Forex Trading Platform.
(Thank sandpipper)

I would not normally post these links, but I see that FXCM posts all over the boards so I do not think the mods will mind. If they do end up deleting the link just search for FXCM UK Demo, I think the second hit on google will bring you to an article.