There are many different forex strategies based on pivot points but not many of them are profitable in the end. Here’s a simple and easy to understand strategy to make pivot points a profitable experience. I really hope you can benefit from this strategy.
Forex Chart Setup
- Preferred Time Frame: 5 Min
- Currency Pairs: Majors
- Indicator: Pivot Points (I only make use of S3, S2 and R2, R3)
Strategy Pivot Point Explained
Long Trades (see example below)
1) The currency price must trade in the vicinity of the oversold S1 or S2 support level.
2) Price isn’t able to close below S1 or S2 (otherwise skip the trade).
3) Wait for the price to develop a bullish bias in the vicinity of S1 or S2 ( for example, you could use bullish candlestick patterns, trend line breaks, bullish chart patterns, …)
4) Now go long according to the bullish pattern’s trading rules and place stop accordingly.
5) Use your own ake profit methods.
Pivot Forex Strategy
The Pound Dollar was not able to close below support1 (S1) on the chart above. You could easily draw a falling trend line and wait for the price to close above the trend line, thus creating a bullish bias. This created a long trade entry at 1.6059 and stop loss below the break out candle at 1.6034. Total risk on the trade: 25 pips + spread.
Short Trades
1) The currency price must trade in the vicinity of the overbought R1 or R2 resistance level.
2) The price isn’t able to close above R1 or R2 (otherwise skip the trade).
3) Wait for the price to develop a bearish bias in the vicinity of R1 or R2 ( for example, you could use bearish candlestick patterns, trend line breaks, bearish chart patterns, …)
4) Go short according to the bearish pattern’s trading rules and place stop accordingly.
5) Use your own take profit methods.