• Minev
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  • From: Bulgaria
  • Registered: 2007-10-29
  • Posts: 52

Topic: Pivot points

A pivot point is a point of rotation. The prices used to calculate the pivot point are the previous period's high, low and close. The pivot points are calculated by the following equations:
R2 = P + (H - L) = P + (R1 - S1)
R1 = (P x 2) - L
P = (H + L + C) / 3
S1 = (P x 2) - H
S2 = P - (H - L) = P - (R1 - S1),
where "S" represents the support levels, "R" the resistance levels and "P" the central pivot point. High, low and close are represented by the "H", "L" and "C" respectively.

The strategy rules are simple:
- buy the first and second test of the central pivot point or the support levels;
- sell the first and second test of the central pivot point or the resistance levels.

For better results I wait for a move ot 20 pips before the test or watch for overbought/oversold conditions.
A picture paints a thousand words. Look at today's USD/JPY chart and you'll see how the priced reatreted several times form various pivot points.

2 Reply by forexer (edited by forexer 2008-06-17 14:30:44)

  • Registered: 2006-12-30
  • Posts: 23

Re: Pivot points

The Pivot Points are popular entry levels. It's good we can easily test it with FSB.

The central Pivot Point is at the middle of the previous bar range weighted with its closing price. The price reaches it during a corrective move during the current bur.

What the entry of your system direction is? You should set additional rules to specify it.

If you want to trade in the direction of the correction:

[Opening point of the position]
Pivot Points
     Enter the market at the Pivot Point
     Base price  -  Previous bar range
     Use previous bar value  -  Yes

[Opening logic condition]
Moving Average
     The position opens above the MA value
     Smoothing method  -  Simple
     Base price  -  Open
     Period  -  1
     Shift  -  0
     Use previous bar value  -  No

In this case MA(Open, 1) is equal to the current bar opening price. So "The position opens above the MA value" means that a long position has to open above the bar opening price. This is in the correction direction. (the current bar opened lower, the price was reached the Picot Point and we open a Long Position)

If you thing that the market will return back after touching the central Pivot Point the logic should be:

[Opening logic condition]
Moving Average
     The position opens below the MA value
     Smoothing method  -  Simple
     Base price  -  Open
     Period  -  1