A Simple Forex Strategy

When trading forex is does not necessarily have to be as complex as some of the signals that are available, which for the beginning trader can be confusing. Even experienced traders will often use a very simple forex strategy from time to time and will more than likely make up a large part of their trading arsenal. In this article I am going to explain the method of using pivot points as a simple forex strategy based on support and resistance.

When studying your forex charts you will always see on all of the time frames where a currency reaches a price and keeps getting knocked back from going past that point. In a buy situation this is known as resistance and in a sell situation this is known as support. Your charting package uses this data from the previous day to mark pivot points on your chart which are represented as dotted lines; black for the main pivot then three green lines for resistance levels 1,2,and 3. On the sell side you will find 3 red dotted lines representing the support levels 1,2 and 3.

Using these pivot points as a simple forex strategy can be very profitable for breakout trades and reverse trading. When a currency breaks through a pivot point it is a good indication that it will carry on that trend up to the next pivot point, when it breaks through the level 3 zones it is a good indication that the currency is over sold or bought and may well reverse. The pivot points can also be used at the 1 and 2 levels for mini trend reversals and can see good profit taking.

Support and resistance is what makes up the basis of most forex trading indicators even the more complex such as Fibonacci retracements are formed from support and resistance levels. To be successful at forex trading does not necessarily mean you have to know the ins and outs of every trading indicator, with a good charting package most of the calculations are done for you.

What is important in forex trading is gaining experience with the different currency pairs and realising the way in which they move. The different major currency pairs have different degrees of volatility and becoming aware of these will help you make the right decision in your forex trading actions. Gaining experience can be done with a demo account which enables you to trade with play money in a real live situation so you have nothing to lose

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