In the world of forex trading, the point of control (POC) is a crucial metric that traders use to identify areas of high volume and liquidity. The POC is the price level at which the highest number of buyers and sellers are transacting in the market, making it a critical level for determining market trends, key support and resistance levels, and potential entry and exit points for trades.
So, how do you find the POC on forex charts? Here are some key steps to follow:
Step 1: Select the timeframe
The first step to finding the POC is to choose the appropriate timeframe. The POC is typically calculated on a daily chart, but it can also be applied to other timeframes, such as hourly or weekly charts. The choice of timeframe will depend on the trader’s trading style, preferences, and goals.
Step 2: Identify the volume indicator
The next step is to identify the volume indicator on the forex chart. The volume indicator is a tool that measures the number of trades that occur at each price level, providing insight into market activity and sentiment. There are several types of volume indicators available, including the on-balance volume (OBV), the volume-weighted average price (VWAP), and the accumulation/distribution (A/D) line.
Step 3: Analyze the chart
Once the volume indicator has been identified, the trader can begin to analyze the chart to identify the POC. The POC is the price level at which the highest volume of trades has occurred. This can be visualized on the chart as a peak or a line of resistance.
Step 4: Determine the POC
To determine the POC, the trader can use a variety of methods. One common approach is to use a moving average or a trendline to identify the area of highest volume. Another approach is to use a pivot point indicator, which calculates the POC based on the previous day’s high, low, and closing prices.
Step 5: Use the POC in trading
Once the POC has been identified, the trader can use it to make informed trading decisions. For example, if the POC is located below the current market price, it may act as a support level, indicating that the market is likely to move higher. Conversely, if the POC is above the current market price, it may act as a resistance level, indicating that the market is likely to move lower.
In addition to using the POC as a support and resistance level, traders can also use it to identify potential entry and exit points for trades. For example, if the market is approaching the POC from below, traders may look for bullish signals, such as a trendline breakout or a bullish candlestick pattern, as a potential entry point. Conversely, if the market is approaching the POC from above, traders may look for bearish signals as a potential exit point.
In conclusion, the point of control is a critical metric that traders use to identify areas of high volume and liquidity in the forex market. By following the steps outlined above, traders can easily identify the POC on forex charts and use it to make informed trading decisions. However, it’s important to remember that the POC is just one piece of the puzzle and should be used in conjunction with other technical indicators and fundamental analysis to make well-informed trading decisions.
