Using Pivot Points to Gauge Market Sentiment
There’s another way to use pivot points in your forex trading strategy — and that’s to measure overall market sentiment.
In other words, pivot points can help you figure out if traders are leaning more toward buying or selling a currency pair.
All you need to do is keep an eye on the pivot point itself, treating it like the 50-yard line on an American football field.
Think of price as the ball — if it’s above the pivot point, the buyers (bulls) are in control. If it’s below, the sellers (bears) are calling the shots.
When Price Stays Above the Pivot Point
If price breaks above the pivot point and holds, it’s often a bullish signal — meaning traders are optimistic and more likely to buy.
That’s your cue to consider going long (buying), kind of like grabbing a Krispy Kreme donut — sweet and tempting. 🍩
For example:
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In this EUR/USD chart, the pair gapped up and opened above the pivot point.
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Price continued to climb, breaking through multiple resistance levels.
This strong performance shows clear bullish momentum.
When Price Stays Below the Pivot Point
On the flip side, if price drops below the pivot point and stays there, it suggests bearish sentiment — traders are more likely to sell.
That’s your signal to go short (sell), like dumping a doomed stock — think Enron or Theranos.
Here’s an example with GBP/USD:
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Price opened below the pivot point and tested it.
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The pivot held as resistance, and price kept falling.
Had you picked up on this clue and sold, you could’ve caught a drop of nearly 300 pips. 💰
But Be Careful — It Doesn’t Always Work
Sometimes, the market fakes you out.
Let’s say you saw price drop below the pivot and decided to short the pair. Suddenly, during the European session, buyers step in, push price back above the pivot, and it stays there — showing a clear shift in sentiment.
That’s the tricky part: traders can change their minds quickly, sometimes within the same trading session.
So what’s the takeaway?
Pivot Points Alone Aren’t Enough
While pivot points can give you a quick read on sentiment, they’re not foolproof. Market direction can shift at any time, and relying on the pivot point alone can lead to false signals.
That’s why it’s best to use pivot point sentiment analysis alongside other tools, such as:
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Momentum indicators (like RSI or MACD)
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Candlestick patterns
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Key support and resistance zones
By combining multiple signals, you’ll have a stronger foundation for your trades — and a better chance of staying on the right side of market sentiment.