Pivot Point High Low Forex Trading Strategy
In trading, there are three keys to a winning trade setup. First is identifying probable areas where price may turn or allow for an entry. You may think of it as an area where you would be waiting at, ready to take action in case a trade setup occurs on that area. You could liken it to a hunter waiting for the game to cross his crosshairs. Next is the actual conditions to take the trade, often called as the trigger. This refers to the conditions that should take place before a trader would take a trade. It is much like an “if-then” condition. If this and this happens at this area of the chart, then I will take the trade. If not, then no trade will be taken. Lastly, the exit, also called as the target price or take profit price. It is a logical point at which a trader would exit the trade because he deems that price to be enough profit for the trade.
In this strategy, we will be using the Pivot Point indicator to give us the areas where we could be looking for a trade while using swing highs and swing lows to identify price levels where we could exit trades.
Pivot Points as Reversal Areas
A Pivot Point is basically indicator that draws horizontal lines on a price chart with a middle price level, three support levels below it and three resistance levels above it. These price levels are conveniently called Pivot Point (PP) referring to the mid-line, Support 1, 2 and 3 (S1, S2 and S3) referring to the support levels below the pivot point, and Resistance 1,2 and 3 (R1, R2 and R3) referring to the resistance levels above the pivot point.
These levels mark areas on the chart which price usually respects as a support or resistance level. You would be surprised how high the probability is that price would react to these price levels.
One advantage of the pivot point supports and resistances is that these levels do not repaint or change. These levels would stay the same for a period, whether it is a daily, weekly or monthly pivot point. This makes pivot points as an effective tool to use when waiting for probable price reversals.
Zigzag Tool as a Basis for Swing Highs and Swing Lows
Swing highs and swing lows are commonly known as natural supports and resistances. If you would look at a chart, you would notice that many times, price levels wherein there was a previous significant reversal in price are areas wherein price would also tend to react to when revisited.
If you would come to think of it, swing highs and swing lows as resistance and support is very logical. If price was deemed to high by the market at a certain price level in the past, then traders should be cautious when price revisits that level again. The market may again consider that price level too high. This makes price near that area as a resistance. On the flip side, when applied to swing lows, this becomes support areas.
It would be a good idea to use these price points as targets because price might just reverse after revisiting these areas.
The problem is that many new traders find it hard to identify the swing highs and swing lows. This is where the zigzag indicator comes in. With the help of the zigzag indicator, it would be easier to identify the swing highs as it draws a line connecting these points.
Trading Strategy Concept
This strategy would be using the Pivot Point levels as areas wherein we will be looking for possible hints of reversals and use the zigzag indicator to identify the swing highs and swing lows using it as targets for take profit levels.
But what is the actual trigger for entry? To enter our trade, we will be taking trades whenever a pin bar is formed. To easily identify the pin bar patterns, we will be using an indicator that would conveniently point them whenever they occur.
Using pin bars as entry points would be a good idea. This is because pin bars are reversal patterns that have a very high probability of success, especially when they occur on areas which are prime for reversal, such as the pivot point levels.
Timeframe: 1-hour chart
Currency Pair: any
Trading Session: any
Buy (Long) Trade Setup
- Price should touch either the pivot point (PP) (Goldenrod) or any of the support levels (S1, S2 or S3) (Red)
- The Pinbar indicator should identify a pin bar pattern and form an arrow pointing up
- Take a buy trade on the confluence of the above rules
- Set the stop loss below the entry candle
- Set the take profit target at the same price level as the previous swing high based on the ZigZag indicator
Sell (Short) Trade Setup
- Price should touch either the pivot point (PP) (Goldenrod) or any of the resistance levels (R1, R2 or R3) (Royal Blue)
- The Pinbar indicator should identify a pin bar pattern and form an arrow pointing down
- Take a sell trade on the confluence of the above rules
- Set the stop loss above the entry candle
- Set the take profit target at the same price level as the previous swing low based on the ZigZag indicator
The pivot points are typically used by traders as a reversal area wherein they could enter a trade. Traditionally, the next couple of pivot point levels are the target levels. However, there are many instances wherein price would reverse prior to reaching the next pivot point level. By using the swing highs and swing lows on conditions when the next pivot point is too far away, we are being a bit more conservative by taking a closer target take profit price.
Forex Trading Systems Installation Instructions
Pivot Point High Low Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex system is to transform the accumulated history data and trading signals.
Pivot Point High Low Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this system accordingly.
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How to install Pivot Point High Low Forex Trading Strategy?
- Download Pivot Point High Low Forex Trading Strategy.zip
- Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex system
- Right click on your trading chart and hover on “Template”
- Move right to select Pivot Point High Low Forex Trading Strategy
- You will see Pivot Point High Low Forex Trading Strategy is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
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