How to use Pivot Points for Range Trading?
1 min read
To enter a pivot point breakout trade, one should open a position using a stop limit order when the price breaks through a pivot point level. These breakouts will mostly occur in the morning. If the breakout is bearish, then the trader should initiate a short trade. If the breakout is bullish, then the trade should be long.
One should always use a stop loss when trading pivot point breakouts. A good place for the trader’s stop would be a top or bottom which is located somewhere before the breakout. This way the trade will always be secured against unexpected price moves.
The trader should hold his or her pivot point breakout trade at least until the price action reaches the next pivot level.
The price will test the levels repeatedly. The more times a currency pair touches a pivot level then reverses, the stronger the extent is.
To improve the viability of this strategy, traders will tie the pivot points strategy to other indicators. For instance, one might use a 50-period simple moving average to measure the trend and bias one’s trades only within the direction of that trend.
Moreover, rather than taking the primary touch of a pivot level, one might require a secondary touch for confirmation that the extent is valid as a turning point.
