Pivot Points in Forex – What They Are and How to Use Them
Pivot points are one of the commonly used triggers for trading systems. If you’re new to the forex market, though, you may be foggy on exactly what pivot points are and what they can mean to your trading.
In a nutshell, pivot points are exactly what they sound like – the point at which the market is expected to turn – if it’s been going down, a pivot point is the value at which it will reverse the trend and begin to climb. If it’s been rising, then the pivot point is where the sentiment of the traders will turn and begin a downward trend. Obviously, being able to predict major movements in the money market is a valuable skill, since it hints at the where the market is moving and whether or not this is the time to trade or stick.
Pivot point trading is an especially popular method of mapping out a trading strategy. It was originally used by floor traders in the stock market who liked it because it allowed them to gauge where the market was heading with just a few simple bits of information and calculations. By knowing the high, low, opening and closing points from the previous day, they could calculate a point at which the market had ‘turned’ to head upward or downward. Pivot points can help predict where the market is going – and coupled with the resistance and support points, give you an idea how far in that direction it will go.
There are a number of ways to calculate the pivot points for the day, but the most common – and easiest – is to average the opening, closing and high points for the last day’s trading. There are other pivot points that can be calculated from those numbers as well. Before we talk about how to calculate them and what they mean, let’s define a few terms:
Pivot point – the point where the market reverses a current trend.
Resistance – A high point in a market chart that recurs regularly. Generally, it’s the point where the market (or currency) will begin a downturn.
Support – A low point in the market chart that recurs regularly. Generally, it’s the point where the market (or currency) will begin to climb back up.
Traditionally, support and resistance points are difficult to break through. Most of the time as the numbers approach that level; there will be a slight rebound in the other direction. An interesting phenomenon is that once a resistance or support point is broken, it tends to switch sides – a broken resistance will often become a support for prices on the other side of the line.
The most common calculation for arriving at a pivot point is:
Pivot: (High + Close + Low)/3
Resistance: 2 * Pivot – Low
Support : 2 * Pivot – High
USD/EUR Date:02/03/06 14:40 O=0.83174 H=0.83188 L=0.83167 C=0.83188
Given this data for Feb 3, 2006, the pivot points for Feb 4, 2006 would look like this:
Pivot: 0.83180
Resistance: 0.83193
Support: 0.83172
Those numbers give me some points on which to base my strategy for the day. If the market opens above the pivot point, it’s a bull market, and most advisors would go for long trades, since the direction of the market is up. If it opens below pivot, it’s time to favor short trades and quick sales.
There are two common sales strategies using pivot, resistance and support points.
Breakout Trade: When a currency pair breaks through a resistance or support point, there’s usually a surge of activity around it. Buy if the charts show a break through a resistance, sell if the rate drops below a support point.
Pullback Trade: When the exchange rate drops back from a high, most traders will buy, based on other information that’s available. It’s a tricky move, though, since the pullback could just be a temporary pause in the upward momentum, or the beginning of a downward rebound.
Using pivot points to inform your strategy in day trading is a complex subject. You’ll find a great deal written about it by various gurus and experts. These basics can help you understand what you’re reading from them.
For more in-dept information visit Professional trader and author Peter Bain's Video Forex Course that demonstrates simple yet powerful Pivot Currency trading systems used by professional traders.
Tuesday, December 15, 2009
Monday, December 7, 2009
Dubai crisis rings bells of prudent investment
Untill last month, Dubai was acclaimed worldwide as an exotic Manhattan on the sea, with huge skyscrapers towering in desert sands alongside golden beaches crowded with stunning hotels and upscale shopping malls.
Unsurprisingly, news of the financial collapse of the emirate's key construction firms came as a shock to many, but as far as regional economists were concerned, the Dubai bubble had been ready to burst for some time.
It is an experience that no country wants to see repeated within its borders. Israeli economists stressed over the weekend that lessons must be learned from the crisis, among which are modesty and caution.
SYMPTOMS
The prevailing view in Israel is that Dubai was simply putting all of its eggs in one basket. Its failure to diversify meant that a meltdown was likely to occur at one point or another.
Diversification of an economy is so important," said Yishay Yafeh, an expert in financial systems at the Hebrew University of Jerusalem.
"You can't base an entire economy on one sector," said Dan Catarivas, director of international relations at the Federation of Israeli Economic Organizations.
Dubai had a bold vision. It took a pearl-fishing village on the edge of the Arabian Desert and transformed it within a matter of a lifetime. Israeli economists told Xinhua they believe that while the dream of Dubai's founder was ambitious and praiseworthy, it was converted over the years by his successors to something that became unsustainable.
Massive investments in real estate led to an overheated economy, and despite government involvement in all the major development companies.
The economy also lacked an export base. In 2006, Dubai's imports totalled some 60 billion U.S. dollars, while exports stood at 5 billion dollars.
"The lesson is that they went too far. It's as simple as that," said Arie Melnik, a professor of economics at the University of Haifa, adding that he believes the "hubris" of the Dubai leaders was at the center of the crisis.
PREVENTION
Catarivas said Israel has got the mix just about right, which is why the country survived the international financial crisis better than most.
Noting that Israel, like Dubai, has virtually no raw materials, local experts said Israel's success is based on human capital.
Meanwhile, they said that Dubai's decision to move the economy in the direction of luxury villas lacked forethought and long-term feasibility.
In Israel, the high-tech industry may be a major force in the economy, recognized as a world leader, but it is not the only basket. Medical supplies, diamond polishing, agriculture and water technologies all rank high.
In Dubai, it was a very different case. "They thought they could do all this even if they couldn't see money at the end of the tunnel. Every small-time builder knows there is one simple rule, you don't begin building if you don't have buyers," said Melnik.
An economy must be diversified, it should be transparent, and a country's leaders should not plan too ambitiously and thus can avoid overextension, said the leading Israeli economists who spoke to Xinhua over the last few days, among other suggestions they offered to ensure no repeat of the Dubai crisis.
"It's about modesty and caution. There, the bubble was behavioral," suggested Moshe Justman, a professor of economics at Ben-Gurion University of the Negev in southern Israel.
FOREVER BURSTING BUBBLES
The Israeli analysts are of the opinion that the Dubai crash will have limited impact on the global stage. However, they cautioned that other crises may be around the corner.
The trouble is how to predict them. "I wanted to call this a million-dollar question, but of course it's worth much more," said Yafeh.
One needs to examine a state's investment portfolio to check whether it is diversified. Then there are the sums involved, said Justman.
There have been bubbles throughout recorded human history, said Yafeh, noting that similar hard times have been occurring for centuries, including the dotcom bubble in recent years.
However, nations tend to survive these difficult moments. The United States may have taken a beating over the last 18 months with the sub-prime crash, but its economy is resilient and large enough to have survived.
Israel and Australia may have growing bubbles right now, but their central banks are playing the game right by adjusting their lending rates accordingly, said Melnik.
At the end of the day, people will view Dubai's financial crisis as nothing more than "a curiosity," according to Yoram Landskroner, an expert on international debt at the Hebrew University of Jerusalem. "Dubai has nothing that links it to any group of nations. It's neither a developed state nor an emerging market."
As a result, little can be applied to other countries from the Dubai experience, other than to say that sometimes caution is the better part of valor.
However, in consideration of previous financial crises in emerging economies, it is safe to predict that some potential investors will no longer put their cash in high-risk, low-rated markets and will return to the days when making a small prudent profit was regarded as far more sensible than a rash gamble on a chancy but exotic option.
David Harris
http://news.xinhuanet.com/english/2009-12/07/content_12601713.htm
Unsurprisingly, news of the financial collapse of the emirate's key construction firms came as a shock to many, but as far as regional economists were concerned, the Dubai bubble had been ready to burst for some time.
It is an experience that no country wants to see repeated within its borders. Israeli economists stressed over the weekend that lessons must be learned from the crisis, among which are modesty and caution.
SYMPTOMS
The prevailing view in Israel is that Dubai was simply putting all of its eggs in one basket. Its failure to diversify meant that a meltdown was likely to occur at one point or another.
Diversification of an economy is so important," said Yishay Yafeh, an expert in financial systems at the Hebrew University of Jerusalem.
"You can't base an entire economy on one sector," said Dan Catarivas, director of international relations at the Federation of Israeli Economic Organizations.
Dubai had a bold vision. It took a pearl-fishing village on the edge of the Arabian Desert and transformed it within a matter of a lifetime. Israeli economists told Xinhua they believe that while the dream of Dubai's founder was ambitious and praiseworthy, it was converted over the years by his successors to something that became unsustainable.
Massive investments in real estate led to an overheated economy, and despite government involvement in all the major development companies.
The economy also lacked an export base. In 2006, Dubai's imports totalled some 60 billion U.S. dollars, while exports stood at 5 billion dollars.
"The lesson is that they went too far. It's as simple as that," said Arie Melnik, a professor of economics at the University of Haifa, adding that he believes the "hubris" of the Dubai leaders was at the center of the crisis.
PREVENTION
Catarivas said Israel has got the mix just about right, which is why the country survived the international financial crisis better than most.
Noting that Israel, like Dubai, has virtually no raw materials, local experts said Israel's success is based on human capital.
Meanwhile, they said that Dubai's decision to move the economy in the direction of luxury villas lacked forethought and long-term feasibility.
In Israel, the high-tech industry may be a major force in the economy, recognized as a world leader, but it is not the only basket. Medical supplies, diamond polishing, agriculture and water technologies all rank high.
In Dubai, it was a very different case. "They thought they could do all this even if they couldn't see money at the end of the tunnel. Every small-time builder knows there is one simple rule, you don't begin building if you don't have buyers," said Melnik.
An economy must be diversified, it should be transparent, and a country's leaders should not plan too ambitiously and thus can avoid overextension, said the leading Israeli economists who spoke to Xinhua over the last few days, among other suggestions they offered to ensure no repeat of the Dubai crisis.
"It's about modesty and caution. There, the bubble was behavioral," suggested Moshe Justman, a professor of economics at Ben-Gurion University of the Negev in southern Israel.
FOREVER BURSTING BUBBLES
The Israeli analysts are of the opinion that the Dubai crash will have limited impact on the global stage. However, they cautioned that other crises may be around the corner.
The trouble is how to predict them. "I wanted to call this a million-dollar question, but of course it's worth much more," said Yafeh.
One needs to examine a state's investment portfolio to check whether it is diversified. Then there are the sums involved, said Justman.
There have been bubbles throughout recorded human history, said Yafeh, noting that similar hard times have been occurring for centuries, including the dotcom bubble in recent years.
However, nations tend to survive these difficult moments. The United States may have taken a beating over the last 18 months with the sub-prime crash, but its economy is resilient and large enough to have survived.
Israel and Australia may have growing bubbles right now, but their central banks are playing the game right by adjusting their lending rates accordingly, said Melnik.
At the end of the day, people will view Dubai's financial crisis as nothing more than "a curiosity," according to Yoram Landskroner, an expert on international debt at the Hebrew University of Jerusalem. "Dubai has nothing that links it to any group of nations. It's neither a developed state nor an emerging market."
As a result, little can be applied to other countries from the Dubai experience, other than to say that sometimes caution is the better part of valor.
However, in consideration of previous financial crises in emerging economies, it is safe to predict that some potential investors will no longer put their cash in high-risk, low-rated markets and will return to the days when making a small prudent profit was regarded as far more sensible than a rash gamble on a chancy but exotic option.
David Harris
http://news.xinhuanet.com/english/2009-12/07/content_12601713.htm
Mediatory Services in Forex Currency Trading
Foreign exchange market (Forex) is the prime financial market in the globe. The overall funds in trade comprise of nearly trillions of US dollars in trade, which is a lot more than the entire amount of stock options and duties of the United States of America.
Forex is a non-stock exchange market that has no physical place. Forex is a banking network consisting of companies, forex brokers, private investors, integrated by one organization of information exchange.
As the Forex exchange trading does not rely on physical place, they trade internationally, all around the clock, with the exception of weekends for the time zone of the country dealing with it.
Foreign exchange covers up markets of most nations with universal platforms for foreign currency exchange trading functions in London, Tokyo and New York.
Major groups of Forex currency trading are:
Insurers – The major group is exporting and importing companies and some of the companies which consist of the few functions in foreign currency. For these partakers in forex, the main objective is to ensure loss minimization in a way keeping away from risks.
Speculators – Personal traders and corporations who are intended to trade foreign currency making profit from foreign currency exchange rates and short-term functions go to this category.
Arbiters – Investors of online forex trading who trade with big amounts of cash to invest and function on two or more markets at the similar time and generally they tend to make profit on the basis of foreign exchange rates.
Forex broker – These are brokers, banking establishments, currency dealers and companies who provide with electronic access to trading platforms and giving mediatory services in currency exchange deals.
Forex is a non-stock exchange market that has no physical place. Forex is a banking network consisting of companies, forex brokers, private investors, integrated by one organization of information exchange.
As the Forex exchange trading does not rely on physical place, they trade internationally, all around the clock, with the exception of weekends for the time zone of the country dealing with it.
Foreign exchange covers up markets of most nations with universal platforms for foreign currency exchange trading functions in London, Tokyo and New York.
Major groups of Forex currency trading are:
Insurers – The major group is exporting and importing companies and some of the companies which consist of the few functions in foreign currency. For these partakers in forex, the main objective is to ensure loss minimization in a way keeping away from risks.
Speculators – Personal traders and corporations who are intended to trade foreign currency making profit from foreign currency exchange rates and short-term functions go to this category.
Arbiters – Investors of online forex trading who trade with big amounts of cash to invest and function on two or more markets at the similar time and generally they tend to make profit on the basis of foreign exchange rates.
Forex broker – These are brokers, banking establishments, currency dealers and companies who provide with electronic access to trading platforms and giving mediatory services in currency exchange deals.
PROLOGUE TO FOREX
Forex rates is the most important aspect that a trader should know. It is better to know the basics of forex before jumping into the trading. Forex has the biggest market world wide when compared to others generating about US$4 trillion trade every day.
Forex is operating worldwide round the clock with governments, national and central banks, hedge funds, corporate companies, various financial institutions, brokers, and currency speculators all participate in the forex trading to make money and upheld their economy. The forex market is closed only during the weekends and opened in all the weekdays. Forex plays an important role in foreign trade and foreign exchange rates.
Forex is also referred as Forex exchange trading or as FX and this involves only the buying and selling of one currency, according to its established value against another currency. Example, a trader buys the US dollars with the euro currency when the US dollar value is weak and sells the US dollars when its value is high against the euro currency. By this a trader can make profits.
Knowing the foreign exchange rate forms the cornerstone factor to predict forex trends and online forex brokers should essentially know this to efficiently practice their skill.
The established value of one currency to another is called exchange rate, which can rise or fall anytime owing to many factors like the stability of the government, stability of the economy, security of the country, etc. However market is also affected by market psychology, political factors, and economic factors like house prices and employment figures etc.
A forex trader will be able to benefit in this forex trading only when he does it in high volumes because the profit margin is always small and when high volumes of forex trading is done in the forex markets, then only the forex trader will be able to amass huge profits.
Forex is operating worldwide round the clock with governments, national and central banks, hedge funds, corporate companies, various financial institutions, brokers, and currency speculators all participate in the forex trading to make money and upheld their economy. The forex market is closed only during the weekends and opened in all the weekdays. Forex plays an important role in foreign trade and foreign exchange rates.
Forex is also referred as Forex exchange trading or as FX and this involves only the buying and selling of one currency, according to its established value against another currency. Example, a trader buys the US dollars with the euro currency when the US dollar value is weak and sells the US dollars when its value is high against the euro currency. By this a trader can make profits.
Knowing the foreign exchange rate forms the cornerstone factor to predict forex trends and online forex brokers should essentially know this to efficiently practice their skill.
The established value of one currency to another is called exchange rate, which can rise or fall anytime owing to many factors like the stability of the government, stability of the economy, security of the country, etc. However market is also affected by market psychology, political factors, and economic factors like house prices and employment figures etc.
A forex trader will be able to benefit in this forex trading only when he does it in high volumes because the profit margin is always small and when high volumes of forex trading is done in the forex markets, then only the forex trader will be able to amass huge profits.
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