Technical Analysis: Advanced Pivot Point Trading Strategy for Silver
The pivot point is often considered as the sweet spot to enter or exit the market while trading any financial instrument. These points act as the key support and resistance level in the price movement which allows the silver trader to find the direction of the trend and take the trade.
When any financial instrument is trading above the daily pivot point it is considered to be uptrend whereas price traded below the daily pivot point level is considered to be the bearish movement of the market.
Let’s see how the professional uses pivot point to execute their trade:
Figure: Trading silver with advanced pivot point method
Unlike other systems, trading silver with advanced pivot point method involves partial booking of the profit. In the above figure, traders open their long trade in the daily pivot level. Daily pivot levels are considered to be the strongest support and resistance zone for silver .Most professional traders set their stop loss just below the daily pivot point whereas some conservative traders use the much wider stop loss. They set their stop loss below the support 1 which helps their trade to remain open while the market exhibits some false move and spikes.
Determining the take profit level is a bit more complex compared to traditional financial trading strategy. Since the trader spotted three major level of resistance in the silver they close their trade in three different stages. When the price of silver reaches the first resistance level professional traders book 50 percent of their profit.
After the successful breakout of the first pivot, traders wait patiently for the price to reach the second resistance zone. Once the market reaches the second key resistance level traders book 25 % of their remaining open position profit and trails their stop-loss to the breakeven point. Some traders uses trailing stop loss for closing the remaining open position on their trade while some prefer to set their take profit level just below the third major pivot point. It’s imperative that every trader uses proper risk management to trade the advanced pivot point strategy in order to avoid unexpected circumstances.