In today forex faq, we have a question from one of our fellow traders asking me to provide a strategy to successfully trade Pivot Point Levels.
Below is the question:
I read your FAQs and other trading Postings regularly. They are very knowledgeable and educational. Thank you for all the information.
May I ask you to provide a strategy to successfully trade Pivot point levels(PP,S1,S2,S3,R1,R2,R3).
First of all, I am glad to know that you like what I am providing here in this blog. What I am sharing with you here is just my own personal experience of using pivot points. However these techniques have not been back tested and therefore I will suggest you to try it out on a demo account and then slowly fine tune it with other indicators to get better trading results.
Pivot points are strong level of support and resistance used by big institution traders and therefore you will find that the price usually respect it. I will suggest you to try plotting daily pivot and weekly pivot on the same chart.
If possible, please draw several Fibonacci levels on the same chart as well. What I am doing here is to look for levels where there is a confluence of support and resistance levels. These overlapping levels are very strong level where the price will most probably repelled by it when it first touches it.
So as a trader, you can try to enter a trade that is based on the repulsion of these levels and you should be able to make some good profits.
Try to fine tune this strategy by adding some indicators that can help you to find a better entry point or help you to avoid getting into losing trades.
To learn how to formulate a strategy, you can take look at my previous post here
What I am sharing with you here is a general formula that I have never done any back test before. All my strategies that I am using in my everyday trades are back-tested by at least six months and then trade on a demo for another 3 to 4 months before it can go live.
For those strategies that are properly back-tested and have been proven to work on live trading, it is all in my Forex Street University Course and therefore I cant share it here with you guys. However you can fine tune what I have provided you in this blog and who knows you may have a very reliable strategy in further.