Pivot Points Analysis and Pivot Point Trade Signals
This indicator consists of a central pivot which is surrounded by 3 resistance levels below and 3 support levels above.
Initially these points were used by floor traders to analyze & trade the equities & futures markets. This indicator is considered to be leading rather than lagging.
Pivots provide a quick way for stock traders to analyze & interpret the general and overall trend of how the market is going to be moving during the course and duration of the trading day. A few simple calculations are used to plot the resistance and support zones.
To calculate these points for the coming day, the previous day's
- high,
- low, and
- closing prices are used
The trading day closes and this daily closing time is when the indicator is updated.
The 24-hour cycle for this trading indicator are calculated using a complex formula. The central pivot is then used to calculate the support & resistance areas as follows:
Resistance 3
Resistance 2
Resistance 1
Pivot Point
Support 1
Support 2
Support 3
Indices Analysis & Generating Signals
This trading indicator can be used in different ways to generate trade signals. The following methods are the most common technical analysis:
Indices Trend Identification Signals
The center pivot is used by stock traders to identify the general market trend direction. The trade positions taken and opened will only be in direction of the trend.
- Buy signal - stock trading price is above the central point
- Sell signal - stock price is below the central point
Indices Price Break-out Signals
Index Price break out signals are derived and generated as follows
- Buy signal- is generated when the price breaks upwards through the central point.
- Sell signal- is derived & generated when the price breaks-out downward through the central point.
Indices Price Break-out
Index Price Reversal Signal
Indices Price reversals are derived and generated as follows
Buy Trade Signal- when trading price moves down towards one of the support area, then touches the support or moves slightly through it then quickly reverses and moves upwards.
Sell Trade Signal- when trading price moves up towards one of the resistance level, then touches the resistance or moves slightly through it then quickly reverses and moves downward.
Indices Price Reversal Signal
Setting Stop loss and Limit Profit Values
The center pivot and the other support & resistance levels are used by stock traders to identify suitable stop loss and limit profit levels.
Setting Stop loss & Limit Profit
If a buy signal is placed above the central point the Resistance One or Resistance Two can be used to set the tp order level, & the Support 1 can be set as a Stop Loss Zone for the position.
To download Pivot points Trading Indicator:
https://c.mql5.com/21/9/pro4x_pivot_lines.mq4
Once you download the indicator. Open it with the MQL4 Language Meta Editor, Then Compile the indicator by pressing the Compile Button and it will be added to your MT4.
NB: Once you as a trader add it to your MT4, the indicator has extra additional lines marked Mid-Points, to remove the additional lines open MQL4 Meta Editor(short cut keyboard key - press F4), and change line 16 from:
Extern bool midpivot = true:
To
Extern bool midpivot = false:
Then Click Compile button again, & the trading indicator will then be shown as illustrated on this web-site.
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