## Pivot Lines

Pivot lines are lines of support and resistance and are very useful in today's forex markets as they increase your profitability. The lines let you anticipate today's high or low. You have a roadmap for upcoming price action. If one of your entry setups is near a pivot line, you will have more confidence in buying or selling.

The new day's pivot lines are calculated from the High (H), Low (L) and Close (C) prices of the previous day (Just use the day charis from your chart provider). Download the free pivot calculator from our website at www.forextechniques.com It calculates Rl, R2, R3, P, SI, S2, S3.

The Pivot Pont First area of resistance Second area of ressstance Third area of ressstance

= P = (H+L+C)/3 = Rl = 2P-L 9 R2 9 (P-Sl) +R1 9 R3 9 2P+ (H-2L)

First area of support Second area of support Third area of support

If there is no sgnificant news to influence the market, price will usually move from P to SI or Rl. On the EUR/USD the Sl or Rl pvot lines have been crossed during 86% of the trading days snce August 1989.

When the direction of the currency has set, the targets are typically the next pvot support or ressstance line. Sometimes the currency will either reverse or consolidate when the pvot support or ressstance line has been reached. Price tends to hesftate around a pvot line. Price can come back to a pvot line and test it before moving on. When a consolidation occurs, the next target is the next support or ressstance pvot line. In a strong trend, price will stice though a pvot line and keep going.

Sometimes price will sop just before reaching a pvot line and then reverse. On other occas^ns, price will go stightly past a pvot line. Alow a bit of leeway.

Price can fail to reach a pvot line if a sgnificant Fibonacci point or trendline sops it.

Take care as the target can also be a sgnificant Fibonacci line. Sometimes where there is 61.8% fibonacci retracement line or a 161.8%projection, this will be the stronger target.

### In summary

If price is at P, watch for a move to Rl or S1. If price is at R1, expect a move to R2 or back towards P If Price is at S1, expect a move to S2 or back towards P If price is at R2, expect a move to R3 or back towards R1 If price is at S2, expect a move to S3 or back to S1.

R3 and S3 are a good indication of the maximum range for the day but can be exceeded occassonally.

In-this -ehart- note- how- the- different-P-ivot

lines and Fibonaeei levels eame into play

In-this -ehart- note- how- the- different-P-ivot

lines and Fibonaeei levels eame into play

■ The-Euro went-up- testing- the IPvot -Line-before going- down 1» '

SI. Note- SI was not reaehed first up but was reaehed on the

■ The-Euro went-up- testing- the IPvot -Line-before going- down 1» '

SI. Note- SI was not reaehed first up but was reaehed on the

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The chart above shows how the major lines interact with the Pivot Lines. In some cases the Pivot Lines mil dominate and in other cases they will not. This highlights the need to put in all relevant lines so you will not be surprised when the currency pair suddenly sops and reverses. There is always a reason why the currency pair sops, consolidates or reverses at a particular point. The chart above illustrates this point.

Often the currency will touch a Pivot Line then move away and come back to retest the line before continuing with the man trade

In the chart above the green arrows show where the pivot lines have come into play. Each time wait for the trade setup and enter with the target at the next Pivot Line.

The currency in many occasions will move between R1 and SI. Typically when the direction of the currency is set it will go to the next Pvot line. In strong moves it may go on through to the R2 or S2 and even to R3 or S3. It is not enough to solely rely on the pvot lines every day as other factors come into pay such as trendlines and Fibonacci lines. In the chart above, if one had traded from the Pvot line to the R1 or S1 there would have been a number of good trades.

Pvot Lines work well in sdeways markets as the action is typically between the R1 and S1 lines.

The chart above shows how Pivot Lines are less effective in a strongly trending market. Because the Pivot Lines are calculated from the previous day's High, Low and Close, the lines lag behind when the market is trending strongly. When the range of the previous day is large, the Pivot Lines will be widely spaced and conversely when the previous day has a narrow range the Pivot Lines dose in.