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What is Pivot Point

Pivot Points

pivot point trading

One of the most useful tools of a Forex trader’s arsenal of tools is the Pivot
Point calculator. This is one of the most frequently used triggers for trading
strategies.

In short, Pivot points are points where the market is expected to reverse. If
the market is in a downswing, the pivot point is the junction or value where
the market will reverse itself and begin an upswing. Likewise, if the market
is in an upswing, the pivot point is the junction or value at which the market
begins to turn and start a downswing. The ability to forecast the major turning
points in the market is an important skill as you will be able to decide your
entry or exit point to and from the market.

Pivot points are used as a very popular technique for crafting a trading
strategy. It was initially adopted by stock market floor traders as it allowed
them to determine what direction the market is heading with just a few
pieces of information and minimal computation. With just the High, Low,
Opening and Closing prices of the previous day trading, one can compute
a “point” when the market will change direction. They are also helpful in
predicting where the market will go and, when used in conjunction with
support and resistance levels, you will be able to estimate how far the trend
may go. pivot point meaning

There are several ways to arrive at a daily pivot point, though the simplest way is to use
the average of the previous day’s high price, low price, and closing price,
then divide by 3.    pivot point trading

 


Example: If the prices of the USD/EUR on Jun 19, 217 are:
Pivot Point
(Previous day High + Previous day Low + Previous day closing)÷ 3
Resistance
(2 X Pivot) – Low
Support
(2 X Pivot) – High\

Closing 0.8357 High: 0.8418 Low: 0.8316
Then, the values of the pivot points for Jun 20, 2017, are:
Pivot = 0.8364 Resistance = 0.8412 Support = 0.8310

 

 

Simple moving average formula

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