Pivot points

Those of you who have already traded for some time, familiar with the reference point. In this article we will look at how to find a reference point, as well as several other approach is to use them. First, let's look at how to calculate the value of reference point.

When using the schedule you have the bars for each bar to open, maximum, minimum, and closure. This displays all price activity during that time. For our example we'll use the bar. To calculate the reference point of all that we need to do - is to add a maximum, minimum and closing. Once this is done, the total is divided by three. For example: Index FTSE on 2 nd May 2002. a maximum of 5192.70, a minimum of 5125.50 and closing at 5174.10, if we add all three values together, you get 15492.3. Then, as a result of dividing the total value is obtained for three reference points - 5164.10.

Now, when the reference point is obtained, the question arises, what to do with this information. One method of using a reference point for intra-day trade is to use it as an indicator of trend. We already know that the reference point on the 2nd May was 5164.10 and we will use it the next day as the intra-day trend indicator. If the price is above 5164.10, then we will sell only to long positions (buy) and if it is below 5164.10, we are working only in the short position (sell). Since the price can fluctuate around a given point, we add an additional condition. If we have the support close to 5164.10, we will first wait until the price will go through check 5164.10 and the level of support before being included in a short position. If we have a resistance close to 5164.10, the first we must wait until the price move through the reference point and the level of resistance before you enter a long position. This technique becomes even more effective when the reference point is located close to the price discovery. If, for example, the opening price is 5174.10, and the value of reference point is equal to 5164.10, then we can get in a short position at around 5155 and remain in the short position to a day until the price goes above a reference point. Opening the position should be immediately placed tight stop-order and then move it following the movement of the market to protect profits. In another approach, control points are used in the analysis to longer-term projections. To do this will be control points of annual, monthly and weekly charts. In this case, would require a maximum, minimum, and the closure of the previous year, month or week. It can be seen weekly reference point for short-term trend for the medium-term trend of monthly and annual for the long-term trend. This may be particularly useful for futures contracts on the market Forex. If you are below the annual, monthly and weekly reference point, then you know that you are in a strong down trend, and therefore can act accordingly, for example, to build positions. The same is true for work in the long position.

There are many ways to use reference points to determine the trend. You can also use the reference points for finding the potential levels of support and resistance, but it will be considered next time.

Experiment with reference points and see whether this approach to your style of trading. At the very least, always important to know where the control points, as this may help you decide on which side of the market to be traded.

Forex Magazine
based on www.daytradingcoach.com