Support and resistance Strategy (FX and Crypto) Description: This strategy uses “support” S and “resistance” R levels, which can be computed using the “pivot point” (a.k.a. the “center”) C as follows:
C = (PH + PL + PC) / 3 R = 2 × C - PL S = 2 × C - PH
Here PH, PL and PC are the previous day’s high, low and closing prices. One way to define a trading signal is as follows (as above, P is the current price):
Signal: Establish long position if P > C Liquidate long position if P ≥ R Establish short position if P < C Liquidate short position if P ≤ S
Other definitions of the pivot point (e.g., using the current trading day’s open price) and higher/lower support/resistance levels exist.
Style tags: Trend Following, Trend Analysis Asset class: Equities, Futures, ETFs, Currencies and Commodities Dataset: FX Minutes/Hours/Days