Another way to include pivot points in your trading strategy is to use pivot levels to assess market trends .
What this means is that you can tell that traders are now more inclined to buy or sell a currency pair.
All you have to do is observe the pivot point. You can treat it like the midfield of a football field.
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Depending on which side of the line the ball (in this case the price) is, you can tell if the buyers own the ball and the field or the sellers have the upper hand.
If the price breaks from the pivot point upwards, it is a sign that buyers have the upper hand in this currency pair and you should think like buying a cake to buy on this currency pair.
The following is an example of what happened when the price stays above the pivot point.
Example of using a pivot point to identify market trends
How to use pivot points to check market trends?
In this example, we see that EUR / USD has opened with a chat above the pivot point.
Then the price went up and up and broke all levels of resistance.
Now, if the price breaks down from the pivot point, then one should think about selling the currency pair.
A price lower than the pivot point indicates a downward market trend, which means that sellers can outperform in this trading session.
Let’s take a look at the GBP / USD chart.
How to use pivot points to check market trends?
In the chart above, we see that the price has touched the pivot point (which acts as a resistance level). The next thing we know is that this currency pair has gone lower and lower.
If you acted on the initial sign that the price remained below the pivot point and traded on the currency pair, you would make good money because GBP / USD has dropped almost 300 pips!
Of course, it does not always come out so well.
Always be careful
There are times when you think sellers have the upper hand in a currency pair and it is a downtrend and then you see that the situation of the currency pair is reversed and the ceiling is broken and it goes up!
How to use pivot points to check market trends?
In this example, if you saw the price break from the pivot point and go down and then sell on it, you would have a very sad day.
Then, during the European session, EUR / USD jumped and finally broke the pivot point. In addition, the pair remained above the pivot point and showed how buyers’ celebrations continued.
What is the lesson here?
Traders are quirky!
The way Forex traders feel about a currency pair can fundamentally change from day to day, even from session to session.
This is why you can not easily buy when the price is above the pivot point or sell when it is below.
Rather, if you decide to use pivot point analysis in this way, you need to combine it with other indicators to be able to identify general market trends.
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