Forex trading is a lucrative business, and every trader wants to make profitable trades. However, it is not as simple as it seems, and one needs to have a thorough understanding of the market to make informed decisions. One such aspect of forex trading that every trader should know is the point of control. In this article, we will explain what the point of control is and how to find it in forex trading.
What is the Point of Control?
The point of control (POC) is a price level where the maximum amount of trading activity has occurred within a specific time period. It is also known as the volume-weighted average price (VWAP). The POC is calculated by taking the total volume of trading for a specific period and dividing it by the total number of trades that occurred during that period.
The POC is an essential indicator in forex trading as it helps traders determine the market sentiment. If the POC is above the current market price, it indicates a bearish sentiment, and if it is below the current price, it indicates a bullish sentiment. The POC can also be used as a support or resistance level.
How to Find the Point of Control in Forex Trading?
There are several ways to find the point of control in forex trading, and we will discuss the most common ones below.
1. Use a Trading Platform
Most trading platforms have built-in indicators that can help traders find the POC. The indicator is usually plotted as a horizontal line on the chart, and traders can adjust the time period to suit their trading style. The POC indicator is available on popular trading platforms such as MT4, MT5, and TradingView.
2. Use Volume Profile
Volume profile is a popular trading tool used by professional traders to analyze the market. It plots the volume traded at each price level, and the POC is the price level with the highest trading volume. Traders can use the volume profile to identify support and resistance levels, and the POC can be used as a target for trades.
3. Use Market Profile
Market profile is similar to volume profile, but it provides a more detailed analysis of the market. It plots the volume traded at each price level and also takes into account the time spent at each price level. The POC is the price level with the highest volume and time spent. Market profile can help traders identify the value area, which is the price range where the majority of trading activity occurred.
4. Use Moving Average
Traders can also use moving averages to find the POC. The moving average is calculated by taking the average price of a currency pair over a specific time period. Traders can adjust the time period to suit their trading style. The POC is the price level where the moving average intersects with the current market price.
The point of control is an essential indicator in forex trading as it helps traders determine the market sentiment and identify support and resistance levels. Traders can use various methods to find the POC, including using a trading platform, volume profile, market profile, and moving averages. It is important to note that the POC should not be used in isolation and should be used in conjunction with other indicators to make informed trading decisions.