The Pivot points (PP) are one of the most common methods for
identifying support and resistance levels. There are several
different methods for calculating pivot points, the most common
of which is the fivepoint system. This system uses the
previous day's high, low and close, along with two support
levels and two resistance levels (totaling five price points)
to derive a pivot point. The equations are as follows:
Pivot Point: P = (High + Low + Close) / 3
Resistance 1: R1 = 2 * P  Low
Resistance 2: R2 = P + (R1  S1)
Resistance 3: R3 = High + 2 * (P  Low)
Support 1: S1 = 2 * P  High
Support 2: S2 = P  (R1  S1)
Support 3: S3 = Low  2 * (High  P)
Note that the High, Low and Close in 24hour markets
(such as forex) are often calculated using New York
closing time (5pm EST) on a 24hour cycle. The Pivot
points are calculated on daily charts but traded
on lower time frame charts (ex. 15 min.).
When trading the tests of the Pivot Points we should
use other indicators or support and resistance levels
for confirmation. For example we can combine the Daily
Pivots with Bollinger Bands on 4 hours chart.
Retracement Logic
Rules for Long Position
 The prices approach daily Pivot Point (PP, S1, S2)
support and the lower Bollinger Band on 15 (or 30)
minutes chart. Use FSB to fine tune this rule.
 Long position is initiated when:
 the price hits the pivot point (PP, S1, S2), or
 the price breaks a few pips below the Pivot Point (PP, S1, S2).  After the position is open an initial stop loss order
is placed 23 pips below the low reached during the test
of the pivot point or at fixed distance from the entry point.
 A limit order is placed according to our Money management rules.
Rules for Short Position
 The prices approach daily Pivot Point (PP, R1, R2)
support and the upper Bollinger Band on 15 (or 30)
minutes chart. Use FSB to fine tune this rule.
 Short position is initiated when:
 the price hits the pivot point (PP, R1, R2), or
 the price breaks a few pips above the Pivot Point (PP, R1, R2).  After the position is open an initial stop loss order
is placed 23 pips above the high reached during the test
of the pivot point or at fixed distance from the entry point.
 A limit order is placed according to our Money management rules.
Indicator chart
Breakout Logic
Market: EURUSD 4 Hours
Rules for Long Position
 The market price breaks through the daily Pivot Point Resistance 2
level.
 The daily PP R2 is above the Upper Bollinger Band.
 Open long position when the price reaches 3 pips above the Resistance 2
level;
 We can open a position once a week
 We close the position at the end of the week.
Rules for Short Position
 The market price breaks through the daily Pivot Point Support 2
level.
 The daily PP S2 is below the Lower Bollinger Band.
 Open short position when the price reaches 3 pips below the Support 2
level;
 We can open a position once a week
 We close the position at the end of the week.
Charts
Balance / Equity chart tested by Forex Strategy Builder
Indicator chart
Parameters, Statistics, Strategy Slots
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http://forexsb.com/strategies/strategypivotpoints.html
