The Pivot Point Squeeze Forex System

The following trading system is a system based on constricted volatility followed by a breakout which co-insides with pivot points.

Indicators used:

Bollinger bands with MA of 18 and deviations of 2 through to 4.2
incrementing by 0.2
Bands 2 – 2.4 Purple
Bands 2.6 – 3 Pink
Bands 3.2 – 3.6 Red
Bands 3.8 – 4.2 Green

MACD with settings:
Short term MA: 5
Long term MA: 13
Signal number periods: 1

Bollinger Bandwidth with settings:
MA periods: 18
Standard deviation: 2

Indicator Settings

Trigger level
Horizontal line at a value which is determined by currency pair
EUR/JPY ~ 0.0056

Pivot Deviation
Distance from a pivot point in which the signal is still valid
14

MACD Threshold
Threshold of the deviation of the MACD that signals an exit
6.2

Making sense of it all

The Bollinger bands are used to visually see the volatility of the underlying security. When they narrow, it shows that the market is not sure which way to push price. I.E no-one is buying or selling with urgency. When there is a lot of traders in the market to sell, you will see the market drop and the Bollinger bands increase in bandwidth. It is the same with an up-trending market as well.

It is the breakout of this constrictive time of the market that I use to enter the market. If this breakout is close to a pivot point, it makes the trade setup even more positive.

Entering a trade

The first thing to look for is the narrowing of the Bollinger bands. When the Bollinger bandwidth crosses under the trigger line, you want to keep an eye out for a low on the histogram followed by an increase in bandwidth. This is a signal that it maybe breaking out and that is the entry point. Enter the market long if the MACD is trending up or short if it is trending down. Put more simply, trade in the way that the market is breaking away.

When I enter a position, I enter a wide stop loss as the EUR/JPY can be volatile and go in the other direction before it trends in the predicted direction.

Exiting a trade

When the MACD histogram is starting to turn in the opposite direction of the trade with a certain threshold of this turn, it can signify an end to the rally. The threshold must be set at a level which is not too sensitive as to make you exit a longer profitable trade but not too lenient as to give much of your profits back. Experimenting with this level is the only way to know which is best for different pairs.

Another way to plan your exits is to stage out at differing pivot levels. Say you enter a trade when it breaks down from the Pivot point. You would exit say half your lots at the 1st support line and then move your stop loss up to entry. Then your remaining lots at the 2nd support.

Some Examples


The top red bars show a short. The bottom indicator pink bars show short entries which do not take into account pivot points. The last trade on the right in which I am still in is turning out quite profitable, I just don’t enter with as many lots as if it did line up with the pivot points. You can see with the restriction of the bands on the right that something big was going to happen, the system tells you when it is time. I set up alarms on the indicator to alert me when to enter a trade. With different pairs I have different voices, so On EUR/JPY I hear “enter long EUROYEN” when the signal is given and “exit EUROYEN”. Pretty cool but enables me not to be glued to the screens, which can be hard to get away from.



Another short term trade short which resulted in a profit of 146 pips



As you can see, the bottom indicator signals multiple entries while the added pivot point signal does not. It still resulted in profitable trades.


Some more great trades

Pablosky Forex System

This forex system was posted by Pablosky at forexfactory.com forum. He said he has created and tested many systems and finally there is one it seems to generate regular profits for him. He only tested it on GBP/JPY and fund that H4 is the best timeframe to spot firm. He said that We have known that trends in GBP/JPY are strong and prolonged, but it's not easy to recognize its beginnings and the right time to exit. He was sure this system should work with other pairs with the right adjustments if needed, as each pair has its own personality.

Target points and Stop Losses for this system are “dynamic”, as he called them, because they change according to the indicators used. You will understand what he means once you read the logics. At first it may look a bit complex, but soon you will realize it's easy to follow and understand. Of course, charts with examples will finally give you the full picture.

This forex system uses visible indicators: ATR Channels and StepChoppyBars v1.1, which needs to work properly StepMA v7 and StepRSI v5.2 indicators.
StepChoppyBars is a great indicator created by Igorad from Forex-TSD.com forum. Legend for StepChoppyBars indicator is the following:

Blue :
Strong UpTrend.
DodgerBlue :
Retrace UpTrend
LightBlue :
Choppy UpTrend
Aqua : B
e ready to change UpTrend
Red :
Strong DownTrend
Tomato :
Retrace DownTrend
Orange :
Choppy DownTrend
Yellow :
Be ready to change DownTrend

Download Pablosky forex system MT4 indikators Here

Buy & Close-Buy Logics
Buy three equal positions when a candle closes between Lime ATR Centre Line and Aqua ATR Line, Step Choppy Bars candle is blue and previous Step Choppy Bar candle is Blue or Yellow. SL for the three opened positions is a candle closing below Yellow ATR line.

Target point for the first position is a candle closing above Aqua ATR line. Once this TP is reached, the Stop loss of the two remaining open positions will be moved to breakeven. TP for the second position is a candle closing above DodgerBlue ATR line. Once this TP is reached, the SL of the remaining open position will be a candle close below Aqua ATR line. If trend continues and price “touches” Blue ATR line, SL of this last position will be now a candle closing below DodgerBlue ATR line. This last position will remain opened till SL is triggered or a candle is painted Aqua.

Note: In the case a candle is painted Red, Tomato, Orange or Yellow during any time of the process, all positions should be closed.

Sell & Close-Sell Logics
Sell three equal positions when a candle closes between ATR Lime centre line and ATR Yellow line, Step Choppy Bars candle is red and previous Step Choppy Bar candle is Red or Aqua. Initial SL for the three opened positions is a candle closing above Aqua ATR line.
TP for the first position is a candle closing below Yellow ATR line. Once this TP is reached, the SL of the two remaining open positions will be moved to breakeven. TP for the second position is when a candle closing below Orange ATR line. Once this TP is reached, the SL of the remaining open position will be a candle closing above Yellow ATR line. If trend continues and price “touches” Red ATR line, SL of the last opened position will be now a candle closing above Orange ATR line. This last position will remain opened till SL is triggered or a candle is painted Yellow.

Note: In the case a candle is painted Blue, DodgerBlue, LightBlue or Aqua during any time of the process, all positions should be closed.

Note: If we see a sell opportunity but the candle is closing between Yellow and Orange lines (instead between Lime and Yellow lines), very close to yellow line, you may:
- Open three positions, apply the TPs and SLs for the 2nd and 3rd positions as usual and use the same TPs and SLs than the 2nd position for the 1st position.
- Open two positions, ignoring the 1st one and applying TPs and SLs for the 2nd and 3rd positions as usual. The same logic applies to a buy opportunity, but doesn't happen frequently.

When taking a position, always wait for the candle to close. A possible variation would be opening only one position and moving the SLs accordingly.

Pablosky said that, what he like about this system is that it generally gives accurate signals and if not, will tell you to exit early avoiding big losses. Also, it's very likely that for not so prolonged trends at least the first TP will be reached, so you will generally exit happy with profits. The system requires attention but not so much, it's enough to take a look at the chart every 4 hours to see how the candle is closing.

Example:

Buy

Sell