Pivot Points MACD Divergence Strategy
Understanding Pivot Points
To understand this forex strategy we need a quick background on pivots points. They play a strong role as support and resistance. Pivot points are nothing but support and resistance levels that are generated from an average of the previous day’s data. To put it in simple terms, consider them as walls. They will try and stop the market as it approaches them. If the wall is really strong, it will make the market reverse from it, if it’s moderate – the market will hover around it, if it’s weak, the market will just break through it. We’re going to use this information to our benefit in the Pivot Points MACD Divergence Forex strategy.
I’m not going to get into complete details on divergence on this strategy page but I’ll give you an overview so you know whats going on. Divergence is a heads up indication that tells you the market is going to turn around. It’s a great addition to any trend reversal strategy for an additional confirmation. Divergence is formed when your market is going one way and your indicator is heading the opposite way.
How to use this forex strategy
After setting up your charts and indicators, the objective then is to wait for a divergence. Once the divergence occurs, you need to check that the current price is on / around a pivot point to allow a smooth reversal. If this is true, at the opening of the next candle you can enter the trade. Ok so lets number this down to steps.
- Look for a Divergence
- Make sure the price is on or around a pivot point
- If step 1 and 2 are true, enter at the opening of the next candle
- Use proper risk to reward money management