XAUUSD Pivot Points

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

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

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

Day traders use the calculated pivots to determine levels of entry, stops & profit taking, by trying to determine where majority of other traders might be doing the same.

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

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

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

In an up trend, the pivot point & the resistance zones may represent a ceiling level for the price. If price goes above this level the up trend 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 then can be used to calculate the support & resistance levels as follows:

Pivot points consist of a central point level surrounded by three support levels below it & three resistance zones 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 of day using only a few simple calculations. However, over time they have also proved exceptionally useful in other markets as well.

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

The central pivot then can be used to calculate the support & resistance levels as follows:

Resistance 3

Resistance 2

Resistance 1

Pivot Point

Support 1

Support 2

Support 3

XAUUSD Pivot Points Support and Resistance Levels - How to Use Pivot Points Indicator

Pivot Points Support and Resistance Areas

Pivot Point as a tool

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

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

In pivot-point analysis 3 levels are oftenly recognized above & below the central point. These are calculated from the range of price movement in the previous trading period & then added to the central point for resistances and subtracted from it for support zones.

Pivots Points

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

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

Price Break Outs: In price break-outs, a bullish buy signal occurs when the price breaks out upward through the central point or one of the resistance zones (typically Resistance Area 1). A short sell signal occurs when price breaks out downward through the center point or one of the support levels (typically Support Zone 1).

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

To download this Pivot points Technical Indicator:

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

Once you download the technical indicator. Open it with the MQL4 Language Meta-Editor, Then Compile the technical indicator by pressing Compile Button and it will be added to your MetaTrader 4.

Note: Once you add it to your MT4, the technical indicator has additional lines named MidPoints, to remove the extra lines open MQL4 Meta Editor(shortcut key-board key - press F4), & change line 16 from:

Extern bool mid-pivots = true:

Extern bool mid-pivots = false:

Then Press Compile button again, and the technical indicator will then appear as illustrated on www.tradeforextrading.com website.

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