Ive recently come to know about them, how they work etc; but been struggling to understand when the best time to make an entry is. Pictured below is a typical example of what i mean, you can see where price as broken through a mS1 pivot but then failed to follow through. I understand this is generally what happens, whether it be trendlines or resistence/support but, how can i avoid these false signals? I tried MACD and STochastic with no luck. Please help
Skip the indicators. They will not help you with pivot point trading.
As far as how to trade them, it depends on how you look at them. For example, on the chart you posted price was above mr1 on the left side of the chart. It went lower and closed below this level. If you expected price to continue down to the pivot then you would have been correct.
Next, there is a giant down bar. There is a pin bar reversal off ms1. If you expected price to go back to the pivot then you would have been right again.
Next, when price closed above the pivot you might have expected it to continue up to mr1 again. Again, you would have been correct.
When price once again close below mr1 you will see that, after a bit of retracing, it hit the pivot again.
Price closed below the pivot and this time it didn’t go anywhere. Too bad. No predictive value with that one. There was a long lower wick a few bars laters when price closed above the pivot indicating a possible reversal to, you guessed it, mr1 again, which it hit.
Don’t look for an indicator to trade pivots. They ARE an indicator.
It is not as easy as I made it out to be since I have the luxury of hindsight but I have used pivots for years and can read small price movements using them fairly well. Since the movements are usually so small between the various pivot lines and midpoints, the spread and inevitable run of losers, which occur with some regularity, can chew your account up if you rely on nothing but pivot trading.
I have found they are not so useful in determining where price is likely to go as where it will not go For that, you may want to check out a few posts on the Statistics in Technical Analysis thread. You may find some of it helpful.
Thanks for the analysis, that last comment was interesting. I’m trying to trade them with currency strength to see if i can get some kind of edge.
I should have saved you some searching – posts 8 and 27 are the specific ones about pivots. 301 Moved Permanently
Thanks, i will read up on it.
I have been reading those posts, is there an indicator which can show yesterdays pivots? i only have an indicator which shows todays.
It depends on your platform; on mt4 there is an indicator that will show you the pivots for everyday and changes when a new day begins.
Tip for pivot point trading: remember that R/S are areas for possible retracements, but not 100%. Always watch for how price reacts at that level.
Try this. It should be a zip file of an mt4 pivot indicator which also shows historic levels.
Pivots.zip (21.8 KB)
Thats perfect! thankyou
the same way you interpretate the lines of your hands