Forex Robot Nation & Pivot Points

Think of pivot points as "industrial strength" resistance and support lines. Since they tend to be used by bank and institutional traders, where a large part of Forex Robot Nation volume is based, they become accurate almost by definition. Like most traders you have probably been taught the importance of resistance and support lines and learned how to define them. Typically this involves examination of several time frames, use of Fibonacci ratios, analysis of candle formations, and much work in drawing these lines on the particular time frames you will be using. This method is also subject to our subconsciously "reading into the data" what we what the results to be as we try to determine what the "major" lines are. Pivot points on the other hand are based on simple mathematical formulae and are completely objective and simple to determine.

We use pivot points by calculating them for the previous 24 hour "session" with the resulting pivot lines being valid for the next 24 hours. You will find that pivot lines also reflect major Fibonacci retracements, classical resistance and support levels, and even elliot wave retracement levels. Since much of the volume in Forex Robot Nation depends on these techniques, pivot lines then become the focal points for the battles between buyers and sellers. We have seen that price action tends to speed up when close to pivot lines (either in breaking through them or bouncing back from them) and therefore they are much safer entry points than simply observing indicators or candlestick formations on their own. No system is perfect and we look to give ourselves every advantage in terms of probability of success.

After calculating pivot points you will have a pivot line and four additional lines to the top and four to the bottom for a total of nine lines corresponding to resistance and support. In general pivots work best in trending markets and trading in the direction of the daily trend is highly recommended. In the direction of the trend you will find price is much more likely to cross several pivot lines in one move. Opposing the trend, price will more often retrace only one pivot channel. Therefore the risk / reward is far greater in the direction of the trend.

In determining when to enter a trade you will look for the usual candlestick formations indicating reversals (hammers, "railroad tracks", engulfing bull and bear candles, spinning tops, and so forth). Confirmations with technical indicators such as RSI which suggest "overbought" and "oversold" conditions are also useful. Adding trend lines to define trading channels is very important. As you can imagine, when price breaks a pivot line and breaks out of a channel at the same time you would expect a quick move.

We post charts for the major currencies showing the pivot lines for the upcoming session each morning prior to the European opening. You can then plot the lines on your own charting system for reference. We have also programmed an "expert" which will automatically plot the pivot lines which we will share with you if you are using the Metatrader platform for charting. If you are interested in this powerful charting system we can provide it (and the expert) free through InterbankFx. Pivot lines are then calculated with a single mouse click. Contact us if you are interested.