How to use Pivot Points - Part 3 | Vantage FX

Vantage FX (www.vantagefx.co.uk) look at how to use the support and resistance levels generated by Pivot Points.

Pivot Points

Today we are looking at a 4-hourly NZD/USD chart from 24 September onwards. At first we move sideways and then we rally from 10 October.

Now let's see how the support and resistance levels work in these two different conditions. Note whether the pivot levels are above or below current pricing, and whether the support and resistance levels fan out massively or whether they are tightly packed. If they are wider it means that the previous day had a big daily range. If there is a sudden lurch from one pivot level to the next, it means that the market has dropped.

When the support and resistance levels are tightly packed, often you would only focus on the third support level and ignore the first two. When they are wide, the first level usually works while the second two don't.

How do you know when you're moving into a trend?

Normally you see a series of pivot levels that either rise or fall. Only from 11 October onwards do we see consecutive steps higher that are evenly spaced, and in this case, the second resistance level works.