The pivot points trading strategy is one of the most popular methods of trading the forex Australia market. Intermediate traders use this to know areas of support and resistance even before the market opens for the day. This trading strategy is preferred by many traders as it offers a leading method of trading the market instead of the lagging method often used by the majority of traders.
How does the pivot point strategy work?
When the market opens below the daily pivot point, it could be said that the market is bearish and the day may be expected to be a downtrend. In this scenario, the trader enters a short position with profit target at the first support level.
On the flip side, if the market opens above the daily pivot, it shows a bullish bias for the trading day. The trader can then enter a buy trade while targeting any of the resistance levels. The third strategy you can use in trading pivot points is by entering trades when there is a bounce at the daily pivot. So for example, if the day opens above the pivot and price moves towards the daily pivot line without going through it, you can enter a buy trade at that point. The same situation applies when the market opens below the line (bearish bias).
Challenges facing pivot points forex traders in Australia
The first challenge you are going to face as a forex Australia trader looking to use this strategy is the inability to be on hand at market open. This is especially the case if you have a day job and must be at work by 7am Australian time.
The forex market opens for the day at the start of the Asian session and this is when most Australians are on their way to work. This makes it hard for traders to be on hand to enter positions in the direction of the daily pivot opening. This won’t be a problem though if your work hours are flexible and you can afford the 5 minutes required to enter trades based on this strategy.
Secondly, most forex Australia traders trade with brokers that have Sunday candles and those whose daily candle open at the start of the New York session. If you use any of these brokers, you will always get different readings from what everyone else is looking at, regardless of whether you got your pivot points values manually or you made use of an automatic tool.
To avoid this, you can either change your broker or open a demo account with a broker that doesn’t have a Sunday candle and also has daily candles that open at 10pm GMT. You can then make your decisions on the demo account while taking the trade on your live account. If you are not conversant with this method, make sure you demo trade it extensively to understand it perfectly.
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