Volatility Pivot Indicator

What is the Volatility Pivot Indicator?

The Volatility Pivot Indicator is a technical analysis tool used in Forex trading to identify potential turning points in market price. It’s based on the average true range (ATR) and calculates support and resistance levels based on the historical volatility of a currency pair. The indicator aims to provide traders with information about the market’s volatility and help them make informed decisions when entering and exiting trades. The Volatility Pivot Indicator is a popular tool among Forex traders due to its ability to adapt to changing market conditions and provide clear and actionable signals.

Volatility Pivot Indicator Strategy

  • Identify the market trend: Determine the overall direction of the market by looking at the chart and seeing if the price is trending upwards, downwards or moving sideways.
  • Locate the Volatility Pivot Indicator: The indicator is typically displayed as horizontal lines on the chart and will show the key support and resistance levels.
  • Confirm the trend with the Volatility Pivot Indicator: If the market is trending upwards, look for the price to bounce off of the support levels, and if the market is trending downwards, look for the price to reject the resistance levels.
  • Enter trades: Once you have confirmed the trend using the Volatility Pivot Indicator, you can enter a trade in the direction of the trend. For example, if the market is trending upwards and the price bounces off of the support level, you can enter a long trade.

Buy Signal

volatility pivot indicator Buy Signal
volatility pivot indicator Buy Signal
  • Identify the trend: The market should be in an uptrend as indicated by the price action on the chart.
  • Locate the Volatility Pivot Indicator: The indicator will display horizontal lines on the chart that show key support and resistance levels.
  • Confirm the trend with the Volatility Pivot Indicator: The price should be above the key support level and have a bullish bounce from the support level.
  • Enter the trade: Place a buy order at the market price when the price rejects the support¬† level, with a stop-loss order placed just above the support level.

Sell Signal

volatility pivot indicator Sell Signal
volatility pivot indicator Sell Signal

A sell signal using the Volatility Pivot Indicator in Forex trading would include the following steps:

  • Identify the trend: The market should be in a downtrend as indicated by the price action on the chart.
  • Locate the Volatility Pivot Indicator: The indicator will display horizontal lines on the chart that show key support and resistance levels.
  • Confirm the trend with the Volatility Pivot Indicator: The price should be below the key resistance level and have a bearish rejection from the resistance level.
  • Enter the trade: Place a sell order at the market price when the price rejects the resistance level, with a stop-loss order placed just above the resistance level.

Volatility Pivot Indicator Pros & Cons

Pros

  • Adaptability: The indicator is based on the average true range (ATR), which allows it to adapt to changing market conditions and provide accurate signals.
  • Clear signals: The indicator provides clear support and resistance levels, making it easier for traders to make informed decisions when entering and exiting trades.
  • Easy to use: The Volatility Pivot Indicator is a simple tool to use and does not require extensive knowledge of technical analysis to interpret the signals.
  • Widely used: The indicator is popular among Forex traders, making it easy to find information and resources related to its use.

Cons

  • Not a standalone indicator: The Volatility Pivot Indicator should not be used as a standalone tool, and it’s important to use techniques for a comprehensive trading strategy.
  • False signals: Like any technical indicator, the Volatility Pivot Indicator can generate false signals, and traders should always practice risk management and never risk more than they can afford to lose.
  • Lagging indicator: The Volatility Pivot Indicator is a lagging indicator, which means it can generate signals after the market has already started to move in a certain direction.

Conclusion

In conclusion, the Volatility Pivot Indicator is a useful tool for Forex traders as it provides clear support and resistance levels based on market volatility. The indicator is easy to use and widely used by traders, making it a popular choice for those looking to improve their trading strategy.

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