# Chapter 15, Part II. How to use Pivot points.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Sep 13, 2011.

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 Part II. How to use Pivot points.
Commander in Pips: So, we know what Pivot points are, how they look like and how to calculate them – let’s shift to the application of Pivot points in Forex trading.

Pipruit: All right!​

Commander in Pips: Before shifting to strategies directly, let’s lay out the rules that have to be applied to the general use of Pivot points:

1. It is preferable to use pivot points 1 time frame higher than that of your trading time frame. If you trade on the daily time frame – use weekly pivots, if you trade on the weekly time frame – monthly. If you trade intraday – you may use daily pivot points as well;

2. Higher time frame pivots are very important for lower time frames. Say if you trade on 30-min charts it does not mean that you should not take into consideration weekly pivots and focus on daily ones only. You have to know where weekly and monthly pivots are even if you trade on 5-min charts.

3. Application of daily pivot points is not spread wide. Some traders use them, but they are much weaker than weekly and monthly. I also very rarely use them. But this is personal – if they work for you – use them!

4. It’s usually assumed that pivot resistance 1 estimates the high for the period and pivot support 1 estimates the low for the period. For example, if we talk about week, then weekly resistance 1 shows the potential high for the week, and weekly pivot support 1 shows the potential low. The same for monthly pivots. But this is just an assumption and not a rule of thumb.

5. Usually the market trades pivot points during the period with a probability around 70-80%. It means that the probability of touching the weekly pivot point by the market during the week is 70-80%. So, if you intend to enter long, but the market stands above the pivot and has not touched it yet – the probability on your side. Possibly you will get much better entry point, when market tends to pivot point. The same is true for downward scenario.

6. When market retraces during a long-term bull trend on the daily chart – it usually retraces to the weekly pivot point or weekly pivot support 1. If market breaks pivot support 1 after a strong up trend – it could be an early notification about breaking of the previous tendency.

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Lasted edited by : Apr 9, 2016
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