Trading XAUUSD Using Pivots Points

Pivot Points is a set of indicators that were developed by floor traders trading the commodity markets so that to help them identify the potential market reversal points. These turning points were referred to as pivots. These pivot point levels are calculated in order and so as to determine the levels at which the market sentiment of current market trend could change from bullish to bearish or vice versa.

Gold traders use the points as markers of support & resistance areas.

These pivot point levels are calculated as the average/mean of the high, low & close from the previous trading market session:

Pivots Points = (High + Low + Close) / 3

Day traders use the calculated pivot point levels to figure out levels of entry, levels of setting stop losses & levels of setting tp order. Pivot points try to figure out where the majority of the traders are setting their orders at the same time - i.e. when many of the traders are doing the same thing.

In technical analysis, a pivot point level is a significant financial trading market indicator that's used by the traders to predict the price movement. This gold indicator is calculated as an average/mean of the significant prices (high, low & close) from the performance of market prices in the previous trading period.

Bullish Sentiment - If the prices in the following period trade above the central pivot point: this is evaluated as a bullish sentimentBearish Sentiment - If the prices in the following period trade below the center pivot point: this is interpreted as a bearish sentiment

The center pivot point is also used to calculate additional levels of support & resistance, below and above this central pivot point, respectively - by either adding or subtracting the price differentials calculated using the previous trading data.

A Pivot & the associated support & resistance levels are often turning points for the direction of the price movement.

In an upward trend - the price stays above the pivot point, the resistance areas might represent a ceiling level for the price & if prices go above these levels then the uptrend is no longer sustainable and a retracement might occur.

In a downwards trend - the price stays below the pivot point, the support levels may represent a floor level for the price and if prices go below these levels then the down trend is no longer sustainable & a rally (pullback) might occur.

The Central Pivot Point is used to calculate the support & resistance areas as follows:

Pivot points consist of a central point level surrounded by 3 support levels below and 3 resistance levels above it. These pivot points were originally used by floor traders equities and futures exchange markets mainly because they provided a quick way for the traders to get a general idea of how the market was moving during the course of the trading day using only a few simple calculations. Over time, these pivot point levels also proved to be exceptionally useful in other trading markets as well.

One reason why these pivot points are now so popular is because they are considered to be a "leading" (or predictive) indicator rather than a lagging indicator.

All that is needed to calculate the pivot point levels for the upcoming (current) day is the previous day's high, low, & closing prices. The 24-hour cycle pivot points in this trading indicator are calculated in accordance to the following formulas:

The center pivot point then can be used to calculate the 3 support & 3 resistance levels as follows:

Resistance 3 Resistance 2 Resistance 1Pivot PointSupport 1 Support 2 Support 3

The Pivot Points indicator is illustrated below:

How to Day Trade Gold Chart with Pivot Points XAUUSD Indicator - How to Trade XAUUSD Chart using Pivot Point Gold Trading Indicator

XAUUSD Trading Using Pivots Points

Pivot Points Technical Analysis

The center pivot point level itself represents a level of the highest resistance/support depending on the overall and general market sentiment. If the market is range bound & directionless then price will often fluctuate greatly around this level until a price break out develops.

Prices above or below the central pivot point shows the overall sentiment as bullish and bearish respectively. Pivot Point indicator is a leading indicator that provides signals of potentially new highs or lows within a given chart timeframe.

The support & resistance levels are used as exit points - e.g., if the price is trending upward and prices are above the central pivot, then prices continue to move up to the first and then the second resistance area - then traders can use the second resistance level as a good place to close their buy trade position, as the probability of resistance & reversal increases greatly/substantially with every resistance level.

In pivot point trading analysis there are 3 levels commonly recognized above and below the center pivot point. These levels are calculated from the range of the price movement in the previous period & then added to the central pivot for resistance areas and subtracted from the central pivot for support areas.

Pivot Points trading analysis is used in 3 ways:

Trend Direction: Central pivot point is useful when determining the general trend of Gold prices. Trades are only opened in the direction of the trend. Buy trades are opened when the price of Gold is above the center pivot point & sell trade positions are opened when price of XAUUSD is below the central pivot point.

Price Breakout: In a price breakout a bullish signal is when prices break upward through the center pivot point or one of the resistance areas (often Resistance 1). A sell signal is when the price breaks downward through the center pivot point or one of the support areas (commonly Support 1).

Trend Reversals: In trend reversal, a buy signal occurs when the price moves towards a support level, often Support 2 or Support 3, & the price of gold touches the support level or only moves a little through it & then reverses and starts heading in the other direction.

A sell signal occurs and happens when XAUUSD price moves towards a resistance area, often Resistance 2 or Resistance 3, & the price of gold touches the resistance level or only moves a little through it & then reverses and starts heading in the other direction.

More Tutorials and Guides and Lessons:

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Trading XAUUSD Using Pivots Points

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