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Trading Pivot Points

This indicator plots the pivot point, three support levels, and three resistance levels. This shapes up the markets for us on a daily basis.

To break down the pivot point we will go over the basics first. In simple terms, no matter what asset you’re trading, all pivot points will be similar based on the calculation provided. You take the days daily high, daily low, and the close for the previous session. Depending on what time frame you’re looking at, this information is how you plot the pivot point for the day. You can set these lines manually and relatively easily if you wish or use the free indicator from this site that plots them automatically. This gives you the freedom of not doing the calculation and drawing the lines on the chart. This information gets applied to the charts when the trading day comes to a close and opens up the next day. This will vary depending on which charting package and broker you use.

Pivot Point TradingThe way we use pivot points is still based on price action. As price moves up or down to the pivot point we use it as an important level. Price has a tendency to gravitate to this spot and will do one of three things. It will consolidate at this level, break through the level, or retrace from the level. This will allow you to take good call and put options no matter which market you are trading. Although we focus on the EURUSD, you can apply this indicator on multiple currencies using the metatrader chart. If you were to trade stocks, you can use charting packages such as freestockcharts.com or E-Signal. They apply their own indicators for pivot points, but technically they will all be the same. The timeframes should all line up based on the closing price.

The further away we get from the pivot line the wider the range will be the next day. When we have a tight range on a Monday, you’ll most likely have a tight range pivot set up on a Tuesday. You need to watch the distances between your support levels, resistance levels and the pivot. When you bring all three together, you can set yourself up with some nice trades. We also recommend that you don’t just trade lines on the charts. We recommend that you have something else working for you to go along with these resistance and support lines. We discussed this in our support and resistance page, but this holds true for the pivot point is well. You need to make sure you take the best trades possible no matter which line you are trading.

If you plan to use pivot points in your future binary trading, make sure you understand how the calculation is made. Just because you see a line on the chart doesn’t mean you should trade it every time.

All these put together allow us to take the best trades throughout the day. You will soon learn that trading using price action will help you make better trading decisions.

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