An organization has tracked and counted relevant data for 7 years, and finally reached a conclusion through a large amount of statistical data:
In 75% or more of the time, the price of the day will return to the PIVOT main axis; professional traders attach great importance to such research results. PIVOT data is an important basis for their transactions, and it is a tool used to analyze important price areas.
In the days when there is no important news, 70-80% of the time the foreign exchange transaction price fluctuates between R1 and S1 above and below the pivot, which is the "Pivot Point".
In this strategy, we use intra-week (nearly 5 days) pivot points for intraday trading (as shown in the figure below).
R1 and R2 are resistance levels, S1 and S2 are support levels, and P is the pivot level. Calculated as follows:
R2 = P + (R1-S1)
R1 = (2 * P) – Low
P = (High + Low + Close)/3
S1 = (2 * P) – High
S2 = P – (R1 – S1)
The statistical results show that this is a simple and effective strategy, and we will explain it through case studies.
Case 1 explains:
An outside bar candle pattern is formed at P pivot point A, which provides effective support. Therefore, if you are long, the position to close the position is R1 B point. We know that once the resistance level is broken, it will turn into a support level, and there is a clear breakthrough at point C, so we can do more decisively! The position to close the position is at point R2 D. The EF point is already in the overbought position of pivot R2. Even if there is still a trading opportunity, the risk is significantly increased, so no trading.
Case 2 explains:
We can see that the level of support and resistance almost coincides with the pivot point P, indicating greater strength. A black candlestick breaks obviously at point A. Our best entry position is at the circle, waiting for the price to break through and retrace. We noticed the formation of the Pinbar candle pattern, go short! The target position is very obvious, we can choose to close half of the position at S1 B and close the other half at S2 C.
Case 3 explanation:
A double top is formed at the resistance of S1, a potential short signal. The pivot point coincides with the level support level at B. When the price breaks through the pivot point and level of 0.9790, we can determine that the breakthrough is successful and we will short the market decisively! The positions C and D corresponding to S1 and S2 are positions for closing positions.
Through the above several cases, we can see that the pivot point has a great auxiliary effect for us to determine the short-term level of support and resistance. Combining traditional technical analysis methods such as candlestick patterns, we can build an effective intraday trading strategy.