Forex is the largest financial market in the world, and yet it is relatively unfamiliar terrain to retail traders. There are many important notes that can be made on Forex and many points that both present and potential investors should be aware of, one of the most important involving Forex pivot points.

Forex Pivot Points

Using pivot points as a trading strategy has been around for a very long time and was actually originally used by floor traders. The Forex pivot points refer to the levels at which the market direction changes for a day. Forex pivot points can be determined by doing some simple arithmetic and the previous days’ high, low and close.

One of the main reasons as to why these pivot points are so popular is because they are predictive and therefore can help significantly in terms of an investor’s profit margin. The majority of traders these days follows these pivot points and uses them to help them gain. There are a few different formulas that can be used to work out the pivot points.

There are also a few different techniques that can be implemented in conjunction with the formula in order to make the most out of Forex pivot points. There is the breakout trade, which is a type of trade in which the investor would have their sell entry order just below the lower channel line with a stop order just above the upper channel line and a target of S1.

There is also the pullback trade, in which the investor places an entry order below support and then a stop is placed above the pullback and a target set for S2. The breakout of resistance often works well, and this is another very good set up for a trade. Here an entry order is placed just above the upper channel line, with a stop just below the lower channel line and the first target would be the pivot line.

Benefits

There are many benefits that are offered by Forex trading, one being leverage. In Forex trading, a small margin deposit can control a much larger total contract value. This leverage is what gives the trader the ability to make significant profits while still keeping their risk capital to a minimum.

Forex trading is also available around the clock, as from Sunday evening to Friday afternoon EST the Forex market never sleeps, and this is very advantageous to those investors who want to trade on a part-time basis because then they are able to do it whenever they want, whenever they have the time.

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Filed under: Forex Technical & Fundamental Analysis

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