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Daily Pivots
To use pivots correctly and to see their true power, you need to calculate them yourself and put them on the same chart as your trading platform. Forget all those moronic plugins for metatrader. This may sound stupid, but trust me on this. DONT use metatrader pivots and then trade on a brokers platform because it will be all spongy. Also nearly all of those pivot plugins you find on the net are TOTALLY WRONG.
If your broker is FXCM, calculate them based on the High, Low and Close provided by your FXCM dealing station chart. If its Oanda, use that chart. Time of day is also critical to get this right. For Europe / US session use midnight to midnight EST, and for Asia recalculate them from 5PM - 5PM EST. Do this: Place a vertical line at yesterdays midnight and todays midnight, find the High and Low of that session, and get the Close from todays midnight open (not close of the candle before). Use the following formula to calculate them (its easy to make a spreadsheet for these). Pivots work because the futures traders use them, not due to some metaphysical magic. Correct formula as follows: R2: (R2) = P - (S1 + R1) M4: M4 = R1 + R2/2 R1: (R1) = (2*P) - L M3: M3 = P + R1/2 PP: (P) = (H + L + C) / 3 M2: M2 = S1 + P/2 S1: (S1) = (2*P) - H M1: M1 = S1 + S2/2 S2: (S2) = P - (R1 + S1) Watch how price (the close) of the 1H candles respects these pivots - if you look at them on lower time frames it will seem like they are soft walls, but on the 1H candles they act like hard walls. I've read various people saying that some pivots are more important than others etc, but I personally see no real evidence of this. Price will sometimes happily trade around a mid-pivot all day long, so in my mind they are all of equal importance. |
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