Trading with Pivot Points allows you to determine when prices will rebound, enabling you to decide when it's best to enter or exit the market. When I first started learning trading, support and resistance were among the things that intrigued me. Fellow traders often made statements like "If the price breaks this level, it will continue to rise" or "If it breaks that level, it will continue to fall," and I wondered how they determined those specific levels. After interacting with various traders and doing research online, I understood that most traders use pivot points as a guide to determine support and resistance.
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Pivot points provide a more objective mathematical calculation compared to other indicators. Although some prefer Fibonacci retracement, pivot points are still considered one of the effective tools. However, the most important thing is how we utilize information from pivot points, such as R1, R2, R3, S1, S2, and S3.
Pivot points and support-resistance levels generally depict price movements within a certain range. This helps us understand how far price movements can occur. Psychologically, traders also have psychological boundaries regarding price levels considered high or low, which then become support and resistance levels.
The general guideline is that if you already know when prices will rebound, you can determine when it's best to enter or exit the market. By knowing the support and resistance points, you can determine when to buy, sell, or take profit. I usually place take profit a few pips below resistance for buy positions or a few pips above support for sell positions. If the trend is still strong, I sometimes place pending orders a few pips above resistance or a few pips below support.
If you already have a reliable indicator, you can also combine signals from that indicator with pivot point references to get a more comprehensive picture of the behavior of a particular currency pair's movement. Thus, you can make better and more informed trading decisions.