Posted by forex at 7:48 AM
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1. Calculate the pivot point parameters for your chosen currency pair. There are three parameters to calculate based on the previous trading period's high, low and closing price. The three parameters are:Pivot Point = (High + Close + Low )/3Resistance = 2 * Pivot - LowSupport = 2 * Pivot -- HighThe relationship between the current price and the pivot point is used to identify the primary trend. An identified uptrend is confirmed if the current price rises above the resistance point. Similarly, a downtrend is confirmed if the current price falls below the support point.
2. Place an entry order. If the current price of your currency pair is above the pivot point and below the resistance point, place an entry order to purchase the currency pair at a price one pip (1/100 of a percent) above the resistance point. Conversely, for a current price between the pivot point and the support point, enter a sell order at one pip below the support point. An entry order is not executed until the current price reaches your chosen entry price.
3. Place a stop-loss order, which closes out a losing position at a specified price. Place the stop on an 'only-if' basis---the stop-loss becomes operational only if your entry order is executed first. Use a stop price one pip below the pivot point if your entry order was a purchase of the currency pair and one pip above the pivot point for sell entry orders.
4. Place a take-profit order. This is also executed on an only-if basis. The take-profit order specifies a price to close out all or part of a profitable position. Use a take-profit price based on the price range: the resistance price minus the support price. For long positions, set the take-profit price equal to the price range plus the pivot point; short positions use the pivot point minus the price range.