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 TRADE BREAKOUTS

yourFXguide-Pivot Points represent support and resistance levels and can be traded as any other support and resistance levels are done. In range trading, when price touches a support and resistance levels, orders are placed. Like any other support and resistance levels, pivot points never hold forever. 

Pivot point breakouts can be traded in two different ways aggressive way and safe way. Here I am going to explain both ways to trade pivot point breakouts. An aggressive way to trade pivot point breakouts refers to the way to trade whenever a breakout of the support or resistance level takes place. 

On above price chart, we can see a breakout of the support-1 took place. For aggressive traders this is an opportunity to place a sell order. The stop loss for the order can be placed just above the support level broken, and the profit target for the orders can be placed at the lower support level. 

Aggressive traders are brave traders, sometimes they dance with winning trades while others cursing their conservative psychology of trading. But the situation can be turned around like the market time shown in the above illustration, where breakout of resistance-1 is taken place and the aggressive traders started eating the sour grapes. 

Experiencing such kind of market situations, smart traders started considering the reliability of breakouts and here comes the safe way of breakouts trading. The reliability of breakouts can be measured in so many different ways. One of the popular way to measure the reliability of breakouts is considering the retesting of support and resistance levels by price.

In above price chart we can see that the price retested the resistance level at pivot point and then broke the resistance level. Traders applying safe way of trading breakouts would consider this as an opportunity to place a buy order. The stop loss for this order can be placed just below the resistance level broken, and the profit target for the order can be placed at the next resistance level. The problem with the technique of measuring reliability of a breakout with retesting a support or resistance level may not be effective in some cases. One of such situations is illustrated below.

In above price chart we can see price retests a resistance level then breaks it, but still the traders applying safe way of breakouts trading are not enjoying the situation. That is why the other techniques of measuring reliability of breakouts should come into consideration. Even some times price retests a support or resistance level for several times, which makes a horizontal channel. 

In bottom line, no trading strategy can be developed to explain the market situations or indicate the market directions 100% accurately. Both aggressive way and safe way of trading breakouts have some advantages and disadvantages. 

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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