Forex Pivot Points

Pivot Points indicator is an indicator which draws a Pivot Point on a chart & also 3 support levels below this pivot point and 3 resistance areas above this pivot point.

Pivot points is a set of indicators developed by floor traders in the commodities markets to determine potential turning points, also referred to as 'pivots'. These points are calculated to identify levels in which the sentiment of the currency trend could change from 'bullish' to 'bearish.' Currency traders use these points as markers of support & resistance.

These points are calculated as the average/mean of the high, low & close from the previous session:

FX Pivot Point = (High + Low + Close) / 3

Day traders use the calculated pivot-points to identify the levels of entry, stops & profit taking, by trying to figure out where majority of other traders may be doing the same.

A pivot-point is a price level of significance in technical analysis of a financial trading market that's used by the traders as a predictive trading indicator of price movement. It's calculated as an average of the significant prices (high, low and close) from the performance of a market in the prior period. If the market prices in the following period trade above the central point it is mostly evaluated as a bullish sentiment, whereas if price below the center pivot point is seen as bearish.

The central point is used to calculate additional levels of support & resistance, below and above central point, respectively, by either subtracting or adding price differentials calculated from previous ranges.

A pivot and the associated support & resistance levels are often turning points for the direction of price movement in a market.

In an up-trend, the pivot-point & the resistance levels may represent a ceiling level for the price. If price goes above this level the uptrend is no longer sustainable and a trend reversal may occur.

In a downtrend, a pivot-point & the support levels may represent a low for price level or a resistance to further decline.

The central pivot-point then can be used in calculating the support & resistance levels as follows:

Pivot points consist of a central point level surrounded by three support levels below it and three resistance areas above it. These points were originally used by floor traders on equity and futures exchanges because they provided a quick way for those traders to get a general idea of how the market was moving during the course and duration of day using a few calculations. However, over time they have also proved exceptionally helpful in other markets as well.

One of the reasons they are now so popular is because they are considered a 'leading' (or predictive) indicator rather than a lagging technical indicator. All that is required to calculate the pivot point levels for the upcoming (current) trading day is the previous day's high, low, and close prices. The 24-hour cycle pivot points in this indicator are calculated according to the following formulas:

The center pivot then can be used in calculating the support & resistance levels as follows:

Resistance 3

Resistance 2

Resistance 1

Pivot Point

Support 1

Support 2

Support 3

Pivot Points Support & Resistance Levels - Trading Pivot Points Support & Resistance Levels

Pivot Points Support and Resistance Areas

Pivot Points as a tool

The pivot point level itself represents a level of highest resistance/support, depending on the overall sentiment. If the market is direction-less ( ranging ) prices will often oscillate greatly around this level until a price breakout develops and forms. Prices above/below the central point shows the overall sentiment as bullish or bearish respectively. This trading indicator is a leading indicator that provides signals of potentially new highs or lows within a given chart time=frame.

The support & resistance levels calculated from the central point and the previous market width may be used as exit points of the open trades, but are rarely used as entry signals. For examples, if the price is up-trending and breaks through the pivot point, the first or second resistance level is often a good target to close out a position, as the probability of resistance and reversal increases greatly, with every resistance zone.

In pivot point analysis three levels are oftenly recognized above & below the central point. These are calculated from the range of price movement in previous period and then added to the central point for resistances and subtracted from it for support levels.

Analysis of Pivots Points

Pivot points levels can be used in many different ways. Here are a few of the most often methods for utilizing them:

Trend Direction: Combined with other analysis methods like overbought oversold oscillators, volatility measurements, etc., the central point may be useful in determining the general trending direction of the currency market. Trade Positions are only opened in direction of the market price trend. Buy trades occur only when price is above the central point & sell trade positions occur only when the price is below the center pivot point.

Trading Price Break Outs: In price break-outs, a bullish buy signal occurs and happens when the price breaks upward through the center point or one of the resistance levels (generally Resistance Area 1). A short sell signal occurs and happens when price breaks downward through the center point or one of the support levels (often Support Level 1).

Trend Reversals: In trend reversals, a buy signal occurs and happens when the price moves towards a support zone, gets very near to it, touches it, or moves just a little through it, and then reverses and starts heading in the other direction.

To download Pivot Points Leves Indicator:

https://c.mql5.com/21/9/pro4x_pivot_lines.mq4

Once you download it. Open it with the MQL4 Language MetaEditor, Then Compile the indicator by clicking Compile Button & it will be added to your MetaTrader 4 Software.

NB: Once you as a trader add it to your MT4 Platform Software, the trading indicator has extra lines known as MidPoints, to remove these extra lines open MQL4 Meta Editor(shortcut key board key - tap F4), and change line 16 from:

Extern bool mid-pivots = true:

Extern bool mid-pivots = false:

Then Press Compile Button again, and it then will appear and be shown as shown & displayed on www.tradeforextrading.com web site.

More Topics & Courses:

Trade Forex Trading

Forex Pivot Points

Pivot Points as a tool

Analysis of Pivots Points