Why do Pivot Points work?

The whole Pivot point trading technique is based on two main market concepts: existence of support and resistance. These two tendencies form the core of the market moves and therefore receive full attention from the vast majority of professional traders who trade on behalf of all kinds of large, medium, small financial institutions, funds as well as for themselves.

Because Pivot points are easy to calculate, millions of automated Forex trading systems in the world automatically execute buy / sell orders analyzing the market moves in relation to the Pivot points.

Also, there are very little variations that can take place when calculating Pivot points (those are only timing factors, but even then pivot points can quite often suggest the same data).

These precision in targets and mutual "agreement" among traders on certain key levels for the day cause the market to really shift, turn and move as huge percentage of traders pull in the same direction using basic Pivot points trading rules.

With EMAs crossing, for example, every trader can set different indicators and thus timing and reaction will not be so well coordinated. Also take Fibonacci, where for each time frame traders pull their own Fibonacci levels, same for trend lines — there are as many opinions out there as traders trading Forex. But when it comes to Pivot points, no matter what chart you use your Pivots will be the same, assuming that even with different time zones traders are able to find pretty close and quite often exact the same pivot point levels = levels of support and resistance, where everyone hits the same button at the same time.

Pivot points outperform other trading techniques and indicators also because they are predictive as opposed to lagging.

Because so many traders worldwide use Pivot points for trading, Forex market reacts at these levels in a quite predictable manner, respectinging support and resistance levels and creating a lot of trading opportunities.

Profitable trading!


Sourcing:
http://www.fxpivot-points.com