Free Pivots vs Commercial Pivots for Traders

Do your pivots match commercial pivot data produced by Mataf.net and other FX data authorities?

Do you want your pivots to be perfectly synchronized to GMT/EST or GMT+1 no matter what timeframe your chart is based on?

Using free pivot indicators might not be as clever as you think. In fact it might be a contributing factor to blowing your account !!

We see a lot of indicator packages which customers send in for customisation or correction. The amount of variation in free pivot software found on the web is simply dazzling. Some of the indicators we've seen contain numerous coding errors ranging from incorrect pivot formulae to incorrect display and update code.

There are subtle nuances with forex pivots which most developers don't consider or even know about. Have you ever wondered why some free pivot indicators don't display daily pivots on Mondays correctly? It's because the developer didn't know some fx brokers provide Sunday data bars in their data feed.

The other area which traders and novice developers completely overlook is pivot offset. Pivot offset is required when the broker's charts are not synchronized to the timeframe you wish to trade in eg. GMT or EST (Eastern Standard Time). In such cases, indicators which rely on rudimentary daily high, low and close data immediately introduce a data skew error.

In the screenshot above you can see how "monkeyware" pivots (poorly written free indicators) introduce data skew which becomes worse as the range extends. The free pivots indicator posted S3 @ 1.5835 whereas the correct value for S3 is 1.58175. That's over 17 pips difference!!!

Mataf.net's published pivot point for S3 @ GMT is 1.5817 as shown in the table below.

The FX AlgoTrader Daily pivot is

0.5 pips from the Mataf.net published version

Why the difference you may ask? There are two reasons for variance on pivot data which are:-

High, Low and Close price differentials between brokers. Normally these will be within a pip or two.

The calculation basis on which the pivot data was calculated. The FXDS pivots use an hourly calculation engine rather than blindly assuming the Daily, Weekly or Monthly pivot data is correct. If you analyse Daily charts for long enough you will find discrepancies between Daily charts and hourly charts in terms of the recorded OHLC (open, high, low and close) data. We use hourly data for our pivot calculations because it is more accurate.

So hopefully you're beginning to see why using professional pivots software makes sense! The question traders using pivots should be asking themselves is

If you're a long term position trader then this is no big deal. If you're a scalper or a day trader this degree of error is the difference between winning and losing. It's a total game changer!

Using multi-timeframe pivots is invaluable as they allow a trader to see short, medium and long term areas of support and resistance and also identify pivot confluence areas.

A pivot confluence is where several different pivots from multiple timeframes are grouped in close proximity. Typically these areas will create a price reaction point as there will be a lot of traders watching and placing trades around these levels. Generally the more significant the pivot levels the more significant the price reaction will be.

The chart below shows an example of a multi-timeframe pivot confluence using the FXDS pivot sofware.

Notice how the multi-timeframe pivots show a twin pivot confluence at M3/WM3 - ie Daily M3 and Weekly M3. Price action has tested the confluence level for 10 hours (screenshot is an hourly chart) and the level is still holding. This is significant! Would you sell this pair? Not without a confirmed break of the M3/WM3 confluence and look what's a few pips below.... another twin pivot confuence which may offer additional support. Traders who do not consider multi-timeframe pivots are effectively trading in the dark!

The FX AlgoTrader V3 pivots software has full S3-R3, WS3-WR3 and MS3 to MR3 pivot arrays. This is especially useful for divergence/reversion traders who like to make trades when pairs are 'pushing the envelope'.

Screen shot below shows the full arrays for Daily, Weekly and Monthly pivots displayed on a weekly chart. The levels seperate out as you zoom into the smaller timeframes.

The FX AlgoTrader pivot software has been developed progressively from trader feedback. The V1-V3 pivot range provide functionality for all levels of forex trader. The core functionality of the products allows traders to control:-

Time shift option (v2 & v3)
Line colour
Line length based on chart period
Intermediate 'M' level display (show/hide options)
Line style options
Pivot label positioning
Ray option for line extension
Visibility based on chart period (v3)
Inclusion of daily high/lows (v3)
Price/pivot proximity audible alerts (reduces screen time massively)
Individual price/proximity alerts (v3)