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Chapter 15, Part II. How to use Pivot points. Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Pipruit: Interesting, but Commander – where we have to place stop-loss orders?​
    Commander in Pips: Right question. Well, major approach to Pivot trading suggests using of Pivots just 1 time frame higher. It means that since we are trading at 4-hour chart we should use daily pivots and not weekly. AS you understand daily pivots are much closer to each other than weekly. That’s why classical approach tells, that you may place stop-loss order beyond the next pivot (conservative tactic) or the same pivot level (aggressive tactic). For instance, if you trade intraday charts and enter long from DPP (daily pivot point) then you can place stop below DPS1 or DPP. If you trade on daily charts and enter from WPP – place stop below WPS1 or WPP itself and so on. Applying WPP in such way will give you too far stop-losses that will make potential trades unattractive, so they hardly could be constantly applied to intraday trading for stop loss-placement. Still weekly pivots are much more important than daily ones, that’s why it seems that a better approach is to use them – just like support or resistance levels, which are known ahead of time.

    Another problem with this major approach is that you never know – is it calm market or not, does market in directional move or not etc. So, it’s better to use Pivot points just as support and resistance lines, almost like Fib retracement levels. Yes, Pivots have some additional qualities, but in general they are just another excellent leading indicator.
    Pipruit: So, it means that we should use it in some context, do we? And pivots are just a fragment in overall analysis?​
    Commander in Pips: Absolutely. Will you buy or sell, just because of support or resistance? I think not. We should wait for some confirmation of this level that could come from some pattern, trend or something. Only after that we can pull the trigger and enter the market. So, the same is with Pivots. The only difference is that they could give us some additional clues about the overall situation. Hence you will place your stop-loss order depending on trigger that you follow. If this is candlestick pattern – you will use one rule, trend – second rule, Fib levels – another rule etc.
     
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