Trading Forex With Woodies Pivot Points
Forex or foreign exchange is one of the most accessible trade markets that you can find among traders. Trading Forex is based on the interest rates of different currencies and the impact they generate on other currency policies.
Forex traders must pay attention to different indicators and information that the Central Banks provide about the economy of different counties. Between the many tools and strategies that you can use to help you predict how the Forex market is going to move, you can find the Woodie pivots points.
Woodie Pivots Points
The woodie pivots system is a strategy where the trader calculates the past prices through a series of formulas to reach the most probable path on the forex trade. The method may seem complicated at first, but once you get familiar with it, it works as a great tool to facilitate the times to make your bids with low risk.
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With this formula, you calculate the possible future prices through the levels of Resistance (R) and Support (S), which have up to four (4) levels. The difference between woodie pivot points and other pivot points strategies is that it uses the most recent prices to base its calculations. This strategy is used by traders that work with technical analysis rather than fundamental analysis.
Resistance is when an uptrend is assumed to pause temporally because of the high concentration of supply. Support, on the other hand, when a downtrend will pause temporally because of the demand. Depending on the levels of these pauses, traders can evaluate the volatility of prices in the next hours or days.
The formula for Woodie pivots goes as follows:
- Support 1 (S1) = (Pivot x 2) – High
- Support 2 (S2) = Pivot – Range
- Support 3 (S3) = Low - 2 x (High - Pivot)
- Resistance 1 (R1) = (Pivot x2) - Low
- Resistance 2 (R2) = Pivot + Range
- Resistance 3 (R3) = High + 2x (Pivot - Low)
Trade effectively with Woodie pivots points
The woodie pivots are more focused on short-term bids, which can be very interesting for traders that buy and sell every two days. It is more dynamic than other pivot points, calculating the most recent prices. However, it also gives you the option for long-term investment, but there are higher chances to succeed in short-term trades.
Pros and Cons of Woodie pivots
- They benefit short-term trading investors, betting on the faster achievement of success, and giving more opportunities for the interday traders.
- They put more attention on the most recent prices, which allow traders to evaluate the short-term trades better.
- They allow traders to have better management of the risks that forex trading can cause. Short trades are usually less risky than long trades, and in case of loss, the amount is not too significant.
- Traders that would instead make bids for long-term investments won’t benefit from this method.
- For traders that are starting on the market, it can be intimidating to start dealing with the formula. This method is more recommended to traders with some expertise on the subject.