Pivot Point Indicator + Broadening Formation: The Hidden Strategy That’s Beating the Market

The Trading Pattern That’s Right Under Your Nose (And Why Most Traders Ignore It)

If you’ve been staring at your charts wondering why price movements feel as unpredictable as a toddler on a sugar rush, you’re not alone. Many traders make the mistake of treating the pivot point indicator like a mere support/resistance tool and completely overlook its potential when paired with the broadening formation. This combo isn’t just a “nice-to-know” trick—it’s a game-changer that could elevate your trading strategy from amateur to elite.

Let’s break down how these two work together and why they’re the ultimate duo for finding high-probability trades where most traders see only chaos.

The Pivot Point Indicator: The Market’s Hidden Roadmap

The pivot point indicator is like a GPS for the market. It calculates key price levels based on the previous day’s trading range, helping traders predict potential turning points.

How It Works:

• Classic Formula:
• Support & Resistance Levels:
  Additional levels (R1, R2, R3, S1, S2, S3) are derived from the pivot point to identify price ceilings and floors.

Why It Matters:

• Institutional traders often place orders around these levels, making them self-fulfilling price magnets.
• It works across all timeframes, making it effective for both intraday and swing traders.

But here’s where most traders mess up: They use pivot points in isolation.

Broadening Formation: The Pattern That Defies Conventional Wisdom

Ever seen a chart that looks like a megaphone with price swings getting wilder? That’s a broadening formation, and it’s one of the most misunderstood patterns in Forex.

Why It’s Important:

• Liquidity Grab: Market makers often drive prices beyond key levels to trigger stop losses and trap retail traders.
• Whipsaws Create Opportunity: Because price moves aggressively in both directions, you can profit whether you’re buying or selling—if you know what to look for.
• Institutional Play: Hedge funds and smart money love this pattern because it flushes out weak hands before the real move happens.

Most traders avoid broadening formations because they think they’re unpredictable. But when combined with pivot points, they become a goldmine.

The Secret Sauce: Combining Pivot Points & Broadening Formations

When price forms a broadening pattern, traders panic, expecting volatility with no direction. However, the pivot point indicator can act as a filter, telling you where price is likely to turn.

How to Trade This Setup:

1. Identify a Broadening Formation: Look for a megaphone-shaped pattern with widening highs and lows.
2. Mark Your Pivot Levels: Draw daily or weekly pivot points and note the support/resistance levels.
3. Wait for a Liquidity Grab: Price will likely fake out beyond a pivot level before reversing.
4. Enter on Confirmation: Once price rejects a pivot level and re-enters the broadening formation, place your trade in the direction of the reversal.
5. Set Smart Targets: Use the next pivot level as a take-profit area.

Example Trade Setup

Let’s say GBP/AUD is forming a broadening pattern, and the daily pivot is at 1.9150. Price spikes down to S2 (1.9100), taking out stop losses before reversing sharply.

• Entry: Buy at 1.9110 after price reclaims S2.
• Stop Loss: Below 1.9080 (under previous low).
• Take Profit: R1 at 1.9200.

This trade capitalizes on the stop-hunting behavior of the market while aligning with pivot point logic.

Why Most Traders Get It Wrong (And How You Can Avoid It)

1. They Chase Breakouts: Instead of waiting for a liquidity grab, they FOMO into trades—just before getting stopped out.
2. They Ignore Institutional Levels: Big players use pivot points. Retail traders who ignore them are flying blind.
3. They Don’t Know How to Handle Volatility: Broadening formations look chaotic, but when paired with pivot levels, they reveal hidden structure.

Final Thoughts: Your Next-Level Trading Strategy

Most traders are stuck in conventional technical analysis, following generic setups that rarely work in real-time markets. If you want an edge, start combining pivot points with broadening formations to exploit liquidity traps like the pros.

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Image Credits: Cover image at the top is AI-generated