forex trading: The benefits of Pivot point in taking profit

I have always found it rather mysterious how mathematics takes its course in our day to day living especially when it relates to money making. Be it in the field of sciences and engineering, banking and investments and also in the course of trading the forex market.

A very simple tool like the plotting of pivot, support and resistance points in an uptrend or downtrend serves as a vital tool in profit taking especially when you have traded a particular currency pair like the GBPUSD.

In the currency market, we can always plot our daily pivots, or in a case where a trend is established as an uptrend or downtrend plot our weekly and monthly pivots. These helps in telling us where we can expect to take profit at the end of the week or month depending on how the pair trends or the strength of the trend.

It should be noted however that trends persist because we have millions of emotional traders all around the world that are looking to increase their equity and these traders rely on the economic news in particular from various countries to place their trades.

In plotting pivot point for this purpose, simply point your cursor on the daily chart on your meta trader, this gives the High, Low and Close for the previous day’s trading, add these up and divide by 3.

Mathematically: Pivot Point=H+L+C/3

Support1= 2*PP – High                          Resistance1=2*PP – Low

Support2=PP – (High – Low)                  Resistance2=PP + (High – Low)

Now, sometimes your pivot or support might be too far for the price action on the currency pair to get to probably as a result of no strong data(fundamental) for its up swing or down swing( ie in an uptrend or downtrend). In this case, you simply do a little calculation. Take for instance, the pair breaks through the pivot point but can’t get to the first support level, then add the pivot point to the support and divide by two. Use that as your temporary take profit point. You can also look to other time frames apart from the one you trade with. It usually speaks for itself. I suggest using SMA100.

For further information on this and how to maximize pivots for extra gains drop a mail.

You can also write an Expert Advisor (EA) that will plot this pivot on your chart which will update daily using your meta trader metaquotes language editor.

Use this in line with your trading system and you will be consistently successful.

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