Welcome! Dear Traders,you are reading my forex trading experiences. Forex trading is a very profitable and very risky business opportunity. If you are a beginner, calm down,have a cup of coffee, and convince yourself that you need to study hard to win in forex trading. Obviously, the task is not easy as the statistics claim that only 5% traders win in forex trading. If you are determined, serious,and hard working, you can surely be included in the group of winners.

HOW TO USE PIVOT POINTS TO MEASURE MARKET SENTIMENT

yourFXguide-We learnt the way to use pivot points for range trading and to trade breakouts. I was surely surprised when I saw pivot points can also be used for sentiment analysis.  We already have COT report as an effective tool of sentiment analysis but incorporating pivot point in sentiment analysis can add a plus point. 

In case of range trading and breakouts trading, pivot points are considered as support or resistance levels, but in sentiment analysis pivot point is considered as a equilibrium point at which both bull and bear are playing equally good. My favorite babypips mentioned pivot point as the 50 yard line of a football field. And the football match is played by the bull and bear. 

However, if in a given situation the price is above the pivot point, it indicates the bulls are playing better. In other way, if the price is below the pivot point, it indicates the bears are playing better.

Yes, you got it !!!

From the above discussion, you can understand when the price breaks the pivot point from below, we should look for the opportunities to go long, and when the price breaks the pivot point from above, we should look for the opportunities to go short on the market. Additionally, as long as price is above the pivot point bullish sentiment is stronger, and as long as price is below the pivot point bearish sentiment is stronger.
 
Look at the above illustration which is 30m chart of eur/usd currency pair. We can see the pair opened above the pivot point and remained bullish for couple of hours. The R1 was broken by the price without any retests. 
 
In the illustration below, another 30m eur/usd chart, we can see a similar situation where the market opened just below the pivot point and remained strongly bearish for couple of hours. S1 and S2 support levels were broken after minor retests.

While trading on the real time price chart, we experience so many different situations and most of them are not identical. For example, some times market may open below the pivot point and break the pivot point later. In some situations, market may break the pivot point twice or thrice in a day. These complex situations can be easy to understand, if a trader has knowledge of fundamental and technical analysis.

Trading any financial market is not an easy job, and a trader should employ a bunch of effective tools on his/her trading platform. Pivot point analysis to understand the market sentiment can be helpful, if applied with other trading tools. For example, if a trader is trading range or breakouts with pivot point analysis, the knowledge of sentiment analysis with pivot points will surely make him more confident.

Dear Traders,If you have any question regarding this post, you can drop it into the comment section below. I generally respond to your comments within 24 hours.

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