One of the tried and tested technical tools that traders have used for years is pivot points. Pivot points are a form of technical analysis that is used by traders as reference points for price. The way to think of them is as support and resistance levels. They are technical places where traders can take profit as well as use them as entry points. If you have never used them before consider them as intraday support and resistance levels. Here is a chart showing the daily pivot points on the USDJPY chart.

They are labelled as follows:

  • P or PP: The ‘Pivot’ point that is like the halfway line between buyers and sellers,
  • R1, R2, and R3 are the pivot points labelled as ‘resistance’ levels,
  • S1. S2. and S3, are the pivot points labelled as ‘support’ levels.

However, don’t get confused here. Just because they are labelled as ‘support’ or ‘resistance’ levels don’t think they have to act like that. Instead, see it like you would any support or resistance level – they can act as both. So, old support becomes new resistance and vice versa. However, I will show you how you can use them.

Develop your bias for your instrument. Let’s say that you have a bias to buy the USDJPY. Yields are rising, a couple of Fed speakers have confirmed the need for faster rates, and the latest US data has shown strength in the economy. This would typically support the USDJPY. So, you would then call up a USDJPY chart and consider the S1, S2, and even S3 as buying opportunities. So, if at the start of the session the USDJPY pair was hovering around the S1 pivot point you could enter with stops just the other side of the S2 pivot point and try to target the Daily Pivot point or the R1.

The settings for the pivot points you want to use are ‘daily’ pivot points and use them on intraday charts. Pivot points will help you with intraday stop placement, entries, and targets in a structured way that traders have relied upon for years. If you have never used them you should certainly consider their usage.

HYCM Lab is a financial analysis source that provides regular insights on how global news affects the markets including forex, commodities, stocks, indices, and cryptocurrencies*. Run by the HYCM team, it equips traders with everything needed to make informed trading decisions.