Forex Pivot Points

Pivot Points indicator is an indicator that draws a Pivot Point on a chart as well as 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 determine levels in which the sentiment of the currency trend could change from 'bullish' to 'bearish.' Currency traders use these points as markers of support and resistance.

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

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

Day traders use the calculated pivot-points to determine 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 market that's used by traders as a predictive trading indicator of price movement. It's calculated as an average of significant prices (high, low and close) from the performance of a market in the prior period. If the market prices in the following period trades above the central point it is 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 and resistance, below and above central point, respectively, by either subtracting or adding price differentials calculated from previous ranges.

A pivot and the associated support and 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 can then be used to calculate the support and 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 of day using a few 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) indicator rather than a lagging technical indicator. All that is required 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

Pivot Points Support and Resistance Levels - Trading Pivot Points Support and Resistance Levels

Pivot Points Support & Resistance Areas

Pivot Points 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 breakout develops. Prices above or below the central point indicates the overall sentiment as bullish or bearish respectively. This trading indicator is a leading technical 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 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 market price is up-trending and breaks through the pivot point, the first or second resistance level 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 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 commonly techniques for utilizing them:

Trend Direction: Combined with other analysis methods such as 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 trend. Buy trades occur only when price is above the central point & sell trades occur only when the price is below the center pivot point.

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

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

To download Pivot points trading Trading 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 add it to your Meta Trader 4 Platform, 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 will then appear as shown on www.tradeforextrading.com web site.

More Topics and Courses:

Trade Forex Trading

Forex Pivot Points

Pivot Points as a tool

Analysis of Pivots Points