Pivot Pinball Forex Day Trading Strategy

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Pivot Pinball Forex Day Trading Strategy

If you were born in the 80s or 90s, you would have remembered a game called “pinball”. This game had a solid ball that would bounce off obstacles. Each obstacle or target that was hit would earn you some points. The goal of this game is to keep the pinball from falling while hitting the targets at the same time.

Trading the forex markets is like playing pinball. The pinball would be price. Price should bounce off obstacles, which are the supports and resistances. Each time price bounces off one of these levels, it should move towards the next support or resistance level. If the momentum is strong enough, it should reach the next level quite easily and sometimes even break through it. If not, then it would drop back down. If you anticipated the right price bounce, you should be earning profits as price moves towards the next support or resistance level.

However, unlike pinball wherein players have paddles which allows you to control when to hit the ball, traders have no control as to where price would bounce and up to what level. Instead, all traders can do is anticipate and guess when price would bounce. Market Flow and Supply and Demand traders know how this works. In fact, most profitable traders incorporate these two methods in their trading.

However, anticipating the correct support or resistance level is very difficult. It is very subjective and is very difficult to predict. Traders who can correctly guess the levels where price would bounce and when price will bounce are the ones who could earn from the forex market.

Pivot Points

Manually plotted supports and resistances are very subjective. Traders would need to develop the skills and experience in order to correctly identify the right support or resistance level. Pivot Points on the other hand automatically plot support and resistance levels making it easier for traders to identify support or resistance levels.

Pivot Point is a technical analysis indicator used to determine the current day’s directional trend bias based on the previous day’s price movement. The pivot point itself is computed based on the average of the high, low and close of the prior day. Price action staying above this level indicates a bullish bias, while price action staying below this level indicates a bearish bias.

The pivot point also acts as a support or resistance level. Price tend to bounce off these levels.

The pivot point indicator also several other supports and resistance, which the S1, S2, S3, R1, R2 and R3. S stands for support, while R stands for resistance. Price also tend to respect these levels as supports and resistances.

Pin Bar

The Pin Bar is probably one of the most popular candlestick patterns. This is because pin bars are easy to recognize and tend to be very reliable trend reversal signals.

The pin bar is a simple candlestick pattern which has a small body with little to no wicks on one end and a long wick on the other end. This is because price would have bounced off quite strongly within one candle causing price to reverse its move to one end very quickly.

The pin bar candlestick pattern signifies price rejection on the area where there is a long wick. This characteristic makes the pin bar a very effective trend reversal entry signal.

The Pin Bar indicator is an entry signal indicator based on the pin bar pattern. It automatically identifies pin bar patterns and plots an arrow pointing the direction of the reversal.

Trading Strategy

Pivot Pinball Forex Day Trading Strategy trades on trend reversals occurring on areas plotted by the pivot points, which occur on the lower timeframes.

The pivot point used in this strategy is a daily pivot. This makes it ideal for short-term day trading.

Trades are identified whenever the Pin Bar indicator plots an arrow indicating a reversal occurring in the area of a pivot point support or resistance level. Trades are then taken with the target being the next support or resistance level.

Indicators:

  • Pivot_AllLevels
  • Pinbar

Preferred Time Frame: 5-minute chart only

Currency Pairs: FX majors, minors and crosses with tight spreads

Trading Sessions: Tokyo, London and New York (depending on the activity of the forex pair)

Buy Trade Setup

Entry

  • Price should touch the area of a support level plotted by the Pivot Point indicator.
  • Price action should indicate signs of price rejection on the area below the support level.
  • The Pin Bar indicator should plot an arrow pointing up.
  • Enter a buy order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss below the arrow.

Exit

  • Set the take profit target on the next resistance level.

Pivot Pinball Forex Day Trading Strategy

Pivot Pinball Forex Day Trading Strategy 2

Sell Trade Setup

Entry

  • Price should touch the area of a resistance level plotted by the Pivot Point indicator.
  • Price action should indicate signs of price rejection on the area above the resistance level.
  • The Pin Bar indicator should plot an arrow pointing down.
  • Enter a sell order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss above the arrow.

Exit

  • Set the take profit target on the next support level.

Pivot Pinball Forex Day Trading Strategy 3

Pivot Pinball Forex Day Trading Strategy 4

Conclusion

This trading strategy is a working trading strategy which many profitable traders use. Many traders would trade trend reversal setups occurring on support or resistance levels plotted by a Pivot Point indicator. One of the more popular method of identifying a reversal using this strategy is by looking for pin bar patterns.

There are times wherein price punch through a support or resistance level and continue towards the next support or resistance level. This is why observing for the characteristics of price action is very important.

At times, traders who are in a trade would find price going their direction and push strongly above their targets. Aggressive traders may aim for the next level and just manage the trades properly as it unfolds. Conservative traders on the other hand would find it prudent to aim just for the next support or resistance target.

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