FX Education: Trading Strategy based on Pivot Point (Part 1)

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By Roger Baettig | August 24, 2012 6:19 AM EST

In my trading I am following a Pivot Point Strategy. I compare every day in the early morning at a certain time the Pivot Point with the previous day close. According to that comparison I open a Pending Order. That's it, that's all I do for my trading.

Let me explain.

This is an ordinary green candle:

This is an ordinary red candle:

So where does the Pivot Point come into the game?

Definition Pivot Point

Pivot Point = (High + Low + Close) / 3

But what does that mean?

Now you might say the candle was red anyway, so we knew already that it is bearish. That is only half true. The candle is read because it closed below the Open. But this doesn't mean that the candle was bearish.

Let's see another example:

What about this candle? It is green. But like the candle before it is bearish, because the close was below the Pivot Point.

But why is this candle bearish?

And that is the whole point of the Pivot Point Strategy. I just compare the Pivot Point with the Close of the daily candle yesterday.

If the Close was above the Pivot Point, it will by a bullish day. If the Close was below the Pivot Point, it will be a bearish day.

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