Business

When price penetrates a pivot number, it often retraces back to the pivot, and touches it briefly. If it was support that was penetrated, and it does not move back up above it, but continues to hover just below it, there is about to be a drop in price.

At the point that it retraces after dropping below support, enter a sell with a modest stop loss somewhere on the other side of the broken support line. Notice the illustration below of the USD/JPY at 2 am EST. The price had just broken below the S2 number, which was 123.38. It briefly touched the 123.38 to 123.41 area and then began to descend. As you can see, it moved down all through the European and US market sessions.


This USD/JPY trade exhibits a problem sometimes encountered. Price either moves higher than the R2 or lower than the S2 number. At that point, it is best to re-calculate the numbers, or monitor the trade based on its relationship to weekly pivot numbers.

Other examples are seen below in the USD/CHF and GBP/USD.


This GBP set-up is an example of simply buying or selling depending on which side of
1.5000 the price is at 07:00 GMT (2:00 am EST). Since the price broke below 1.5000,
you would wait until it retraced back to 1.5000, and then sell. Your target would be the next pivot line which was 1.4960. If all you did was trade one set of pivots each tradingsession, you would have a high percentage of wins to losses, and could realistically book 20 to 50 pips on each of the 4 major currencies. (Note: Had you been using a MVA crossover method, you would have entered the market well into “NO MAN’S LAND.” The same would be true of any indicator that lags behind the market action).