Forex Pivot Point

Posted by: | Posted on 11:28:00 PM | Post Categories

Pivot point is a very popular method in Forex for determining buy-sell signals. Pivot points are widely used by traders to mark reversal points (where the price goes in the opposite direction).

At the pivot point the chart is divided into several sections. The middle point is the pivot point (PP). Market bullish if the price is above the pivot point (upward movement of the market) and market bearish if the price is below the pivot point (downward market movement). R1, R2 and R3 are above the resistance level and pivot point (PP). S1, S2 and S3 are below the support level and pivot point (PP).

 

Here,

    PP = Pivot point
    S = Support
    R = Resistance

 
How pivot points are calculated:

In case of pivot point:

    High = Yesterday's price went to the highest price
    Low = Yesterday's price went to the lowest price
    Close = Yesterday the market closed at that price

Calculation:

R3 = High + 2 x (PP – Low)
R2 = PP + (High – Low) = PP + (R1 – S1)
R1 = (PP x 2) – Low
PP = (High + Low + Close) / 3
S1 = (PP x 2) – High
S2 = PP – (High – Low) = PP – (R1 – S1)
S3 = Low – 2 x (High – PP)

   


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