A pivot point is a price level which is used to forecast significant market support and resistance based on the prior day’s trading range. Most people use daily and weekly pivot points especially for intraday trading to pick out good reversal points in the market.
Here at The Forex Army, we take it one level further by introducing our own Fibonacci Pivot Points which is an adaptation from the standard pivot point and is historically more accurate in picking out reversal points than standard pivot points.
Absolutely 100% not. The daily fibonacci pivot point combined with even the weekly pivot points is not enough to standalone as a trading strategy that will prove profitable in the long run. You need a couple more indicators to complement it for it to become a highly profitable trading strategy.
One of our live traders (2nd Lieutenant Jimmy) has developed a strategy that has proven tremendously profitable (hence we naming it after him). Here’s a preview of his profits in January on a live ATC account :
The key point is to find indicators that point out key levels which reversals could potentially happen. As a combination of these indicators around pivot points can greatly increase your accuracy in picking an extremely high risk : reward trade (think 1 : 10+). In this section, we’ll cover what are the recommended indicators to be combined with the Fibonacci Pivot Point indicator.
The Relative Strength Index (RSI) is one of the best oscillator indicator and perhaps the only one I ever use. With an adapted period of 13 (because of it’s fibonacci sequence), it helps pick out market tops and bottoms with great ease.
I’ve been trading long enough to know that every single market/currency responds differently to different key levels in RSI and in this tutorial on RSI Explained, I’ll explain more in-depth on the various ways you can use RSI to trade properly. For now, here’s one of the ways (and my preferred way) to use RSI in this trading setup, the key here is not to use the standard 20/80 rule as overbought and oversold and instead plot them out and find the specific levels and areas yourself :
The TFA Advanced Fibonacci Waves is what drives all the calculations behind the TFA Sniper, you can see how price responds almost magically to many of the waves. There are usually 2 areas of focus when observing the TFA Sniper on a single time frame :
- Areas of consolidation
- Wide Fibonacci Lines
Areas of consolidation
You can see in the above picture the areas of consolidation of the TFA Advanced Fibonacci Waves prove as great resistance even if just observing on a single time frame. While others have traded purely off these fibonacci waves by themselves, it is highly recommended to combine it with other indicators to give clearer confirmation of entry valid entry signals. In this case, we are looking for a combination of :
- Fibonacci pivot point
- Area of consolidation
With these 3 combined, you have a good chance of seeing price reverse.
Wide Fibonacci Lines
Wide fibonacci lines usually stand by themselves, but they hold a lot of power in them. These are key reversal points and the wider they are, the stronger they are in forecasting reversals.
It’s important not to trade these by themselves too, instead, combine it with the above mentioned fibonacci pivot points and RSI to pick out good reversal trades.
An additional point you can look out for to add further conviction to your trade are candlestick reversal patterns. There are a lot of information out there on candlestick reversals and I urge everyone to read up on them as much as possible. I personally love it when the candles have long “wicks” or “shadows”. couple of my favorites and which I personally think are the clearest are the following :
There are numerous ways we can target take profit levels and manage our trades. Here are a couple of ways that are suggested :
Jimmy’s method is the most straightforward method, it involves setting a take profit at the first pivot point in the opposite direction. Meaning if you’re on the first resistance pivot point, you set your take profit on the first support pivot point. If you’re on the second resistance pivot point, you similarly set your take profit on the first support pivot point. Here’s an example :
One other effective way to take profit is to use fibonacci retracement levels, especially those that coincide with graphical overlap levels (refer to the breakout pullback strategy to understand what a graphical overlap level means)
What are the recommended fibonacci retracement levels to use? We recommend the golden ratio (0.618) to be used when taking such profits.
Below is an example of a good AUDUSD trade opportunity with the JT strategy. Notice how the 61.8% retracement coincides with the breakout level too. In this case, it would be fine to use either the 61.8% and the 50% level. We can even take half our position at 50% and the other half at 61.8%.
In conclusion, using pivot points is a very profitable way to trade but it’s not recommended to use them exclusively by themselves to trade. They should be combined with the really powerful advanced fibonacci waves we have here, along with a knowledge on using RSI correctly to pick reversal points. On top of that, it’s important you equip yourself with the knowledge of learning how to use fibonacci retracements to pick certain levels to take your profits at.
There are many websites out there that teach you how to use pivot points like those at investopedia and stockcharts but sadly, they are usually insufficient as they do not help you see the market holistically.
Now that you’re done with this tutorial on how to use pivot points in intraday trading, I highly recommend you check out our other scalping strategies like our famous breakout pullback strategy that brought in 134% in 1 month on a live account.