Can you please explain to me the use of pivot points. I know you use the previous days averages to calculate them but how do you employ them in your trading. How do you plot them into MT4? Do you use standard pivots or fib pivots? Thanks
h2oman
find an indicator that calculates and plots them on your charts automatically(there are many to choose from…google pivot point indicator). Use just standard daily pivots, some people also use weekly and monthly, but daily is a good start. Then you can choose to have your pivots calculated at the close in NewYork which is 5pm eastern or midnight eastern - its up to you.
Probably for asian session use 5pm close and for usa people midnight eastern close to do the daily calculation.
Then the 7 lines plotted are, from bottom of the chart up, S3, S2, S1, PP, R1, R2 and R3). Thes lines are then used as daily support or resistances levels to help predict price. They can be used as profit targets/trade exits or areas to get into trades where price might reverse or continue
The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels.
Pivot points must be used just as support and resistance levels, not as an entry signal.
I pay more atenttion to weekly and monthly pivots, and try to see if one of them happens to be in the same place of another tool such as fibs or trendlines, or bollinger bands, etc. They just add strenght to a price level.
Hope that helps…
Here’s a pretty good article dealing with the use of pivot levels in forex trading —
Pivot Point Trading by Mark McRae - Surefire Forex Trading
How do you plot them into MT4?
Sorry, I don’t use MT4, so I can’t answer this one.
Do you use standard pivots or fib pivots?
There are several different methods of calculating pivots, and each method has its own set of formulas, generating a unique set of prices for the various pivot levels.
Most traders use the so-called “Classic” set of formulas, and most traders apply them to the daily time-frame.
Also consider calculating mid points. That is you plot the mid point between your calculated pivots. These levels also work as support/resistance.
Try to use standar daily pivots and watch for yourself how price travels among these levels like a ping pong ball, how price fills the numbers among pivots. Personally I calculate them at 12:00 am EST, and they work nicely for the London, NY sessions.
How to use them is up to you. You could look for confluence of other overlays like natural support/resistance, fibonacci retracements, etc. and watch how price reacts to the pivots, look for an obvious and quick rejection of price for a reversal, or a clean cut for a continuation. Just some ideas.
It seems that there’s an age-old argument as to what timeframe to use for caluclating daily pivots: 12am EST or 5pm EST. I trade the Asia session and want to use the most common set up by traders trading during that session. First, I was suggested to use 5pm, then 12am, then 5pm, etc. Then I did research and still the same - conflicting advice. :mad: Can someone please indicate which one is more common? Thanks.
Plot both, and see which works. If they work, it should be clear from the price action.
Okay, understood. But does anyone know what is more common with the big dogs trading the Asian session?
For me, trading volume tells an unambiguous story.
Worldwide, trading volume virtually dies between 5pm and 6pm New York time, every day.
So, I use daily pivots calculated at 5pm ET, and I use all 13 pivot levels, including all the intermediate levels.
Here’s a tick-volume chart of the GBP/USD for the past several days. Each bar is 2 hours. So, there are 12 bars per day.
I have added day-separators at 5pm each day. Notice the wave pattern of the tick-volume, from 5pm to 5pm to 5pm.
Tick-volume is a reasonable proxy for true dollar-volume (which is essentially impossible to track).
It doesn’t matter which session you’re trading – Tokyo, London, New York – this is the ebb and flow of the total world market.
Great chart and perceptive. I think this cliches it - 5 to 5 is obviously the most logical. Thanks.
That chart looks familiar… 
Does anyone use Camarilla pivots? Any opinions on them vs the usual pivots?
Thanks for info guys! I learned some…