Mapping our Time Frame
If you are anywhere as directionally challenged as me you are hopeless trying to find your way around without GPS or a map – imagine how hard it would be if the streets changed numbers and locations each day; like the currency market changes. So in trading as it is useful to have a map and be able to see where the price is relative to previous market action. This way we can see the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.
Pivot points are a well-known technique developed by floor traders that help us see where the price is relative to previous market action.
As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from “bull” to “bear” or vice versa. If the market breaks this level upwards, then the sentiment is said to be a bull market and the market is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and the market is expected to continue its way down.
Also at this level, the market is expected to have some kind of support/resistance, and if price cannot break the pivot point, a possible bounce from it is plausible.
Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.
In this lesson we will cover the following topics:
Nuts and bolts on PP
An Objective Alternative, we will propose a new alternative to map our timeframe.
An important tool to evaluate the trend on any timeframe.
How we use our mapping method to set the RR ratio of any trade.
Our mapping method also helps us to trade in an effective way.
The mapping method could also be applied to longer term trading such as swing trading or position trading.
A brief summary of the chapter