How to use pivot points in trading CFD?

[Mary S]

Hi, explain how I can use pivot points in trading CFD.

[Dan]

Hi Mary,

There are many ways you can analyze charts in a CFD market; the pivot point technique is one of them. The use of pivot points is usually disregarded; however, it is still a systematic way that you can employ to check the support and resistance levels. Support and resistance levels seek to spot a breakout from a sabotaged price fluctuation.

In this trading technique, you construct a pivot line from where you will draw several support and resistance levels. You will be able to recognize any significant move that is breaking out from the price range. You can draw your pivot line depending on the previous day's price levels or base your drawing on other disparities.

You will multiply the value of the pivot by two and subtract the lowest price seen in the pivot day to get the first resistance line. To get the first support line, you will also use this method only to subtract the highest value you get during the pivot day.

To calculate the support and resistance levels in the second pivot line, you apply the same strategy. These resistance levels are usually away from the pivot line, as the whole pivot day range. In the second support level, you take the pivot point lee the previous high and low. The second resistance level is calculated, taking the pivot point, add the last high, and subtract the previous low.

Pivot points will analyze how the market moves depending high, medium, and low price levels of the previous trading day. You will see a bullish market if the next trading prices are above the pivot point. A bearish market will occur if the trading prices are below the pivot point.

Since the pivot points act as support and resistance mechanism, they determine the direction that the market prices follow.  You will find support if the market prices are falling and contrarily look for a resistance level if the prices are rising.