What Is The Pivot Point Forex Trading System

The pivot point Forex trading system is a technique used in forecasting the movement of currencies in the foreign exchange market. In general, pivot points refer to mathematically calculated places of price support and resistance. And, the pivot point strategy makes use of trend hypotheses to the pivot points to forecast the direction the market is likely to take.

For instance, if EUR/USD closing price of 1.562 is below a price average of 1.565, and the previous days close was also 1.565. This means that todays closing price has moved lower than the pivot points where support is formed around the prices moving average. If you want to trade this drop through the pivot point, you would probably enter a sell order on the currency pair.

The pivot point Forex trading system is a very beneficial strategy for trading currencies. Importantly, it provides traders with an idea on spotting profitable trading opportunities. The pivot point Forex trading system gives a mathematically derived sense of order so as to assist traders in knowing where to place their trades in the market.

To put plainly, it helps in recognizing patterns as well as price movements in order for traders to make profitable decisions faster. In most instances, those patterns are drops and rises below and above significant price areas. These price areas may be pivot points, support levels, or resistance levels.

When used in trading, traders usually watch the price movement all through the day and execute trades according to the indications given by the pivot point system. Even though the pivot point system is primarily used for trading currencies in the short-term, it may also be used for identifying long-term trade opportunities.

Several methods are available for calculating pivot points. One of the simplest methods is called the Average Price Method. It involves calculating the previous days average price by adding the high, low, and close prices. And, the result is then divided by three to find the average. When this method is used for trading, traders usually look if the next days price moves above or below this level in order to establish a pivot point and identify potential trade opportunities.

In conclusion, the pivot point Forex trading system is a useful strategy for trading currencies. Nonetheless, just like any other strategy, it should never be used in isolation. If combined with other strategies such as fundamental analysis, it can be very profitable.