One of the most used tools of technical analysis are the pivot points, which are used to determine a number of levels of prices, which have a high probability of acting as either support or resistance of importance. For this reason, the price may bounce hard at these levels or it can move through them in a strong breakout movement which can produce a good profit. The pivot points serve as a guide to estimate, along with other indicators, how far can extend a trend, where the trend has a high probability to reverse and which are the key levels either in intraday trading and long term trading. For these reasons, the pivot points are important indicators for traders and investors in different financial markets like Forex.
Although the formulas for calculating these levels are simple, this pivot point calculator provided by the broker HotForex allow to calculate them more easily.
In this case, add the maximum price of the previous session (High) the minimum price (Low) and the closing price and the tool will calculate the pivot, the top four resistances (R1, R2, R3 and R4) and the four main supports (S1, S2, S3 and S4) for the current session. Furthermore, the tool offers different types of pivot points, including classic and Camarilla for example.
The values of the pivot points presented in the first column of the calculation results table, are the most basic and popular type of pivots used in Forex trading technical analysis. The pivot point is interpreted as the primary support/resistance level – the point at which the main trend will be born. First-third level resistance and support points serve as additional indicators of possible trend reversal or continuation. The rules to calculate floor pivot points are quite simple:
Pivot (P) = (H + L + C) / 3
Resistance (R1) = (2 X P) – L
R2 = P + H – L
R3 = H + 2 X (P – L)
Support (S1) = (2 X P) – H
S2 = P – H + L
S3 = L – 2 X (H – P)
The levels of supports and resistances determined by the pivot point formulas are used by thousands of traders around the world to determine the entry and exit points of their trades. Is a very useful tool for expert and beginners traders.