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Forex Pivot Points, How to Calculate Pivot Points, How to Use Pivot Points to Trade Breakouts, to Measure Market Sentiment

Forex Pivot Points, How to Calculate Pivot Points, How to Use Pivot Points to Trade Breakouts, to Measure Market Sentiment

Traders indulge in trading at Forex, frequently use Forex Pivot Points for trading as these points help in identifying the related resistance and support level. These points help in determining the way where the price change will go, for an ongoing trend. Forex Pivot Points are the objective type of points, despite the other indicators which are distinct. These points are quite similar to that of the Fibonacci levels as the majority of traders use and rely on these points, making them self- fulfilling. Slight difference between the two are, Fibonacci is a bit subjective and descriptive while FX Pivots are solely objective.

Different traders have to various user preferences for this FX Pivot Points. However, most of them use the points for sure. Traders who are range-bounded use these points to reveal the reversal points of the ongoing trend. Breakout traders who are looking for the critical levels to be broken use FX Pivotal Points for the same reason. Traders who are willing to use these useful points should get familiar with the lingo used in it. Pivot Points are represented as the PP in the chart, whereas R goes for Resistance and S represents Support. A detailed study should be done regarding FX Pivotal Points types, methods of use and their implementation in a trader’s tool kit. Without proper knowledge of these indicating points, it is advised not to use them. Experts consider these FX Pivot Points to be more useful for short term trading people at FX.

How to Calculate Pivot Points

Pivot points are indicators which are used to determine the potential turning points, for effective trading. These points are calculated along with their respective support and resistance level, by using previous FX trading session’s high-low and open-close. Forex being 24 hours running market, the majority of traders consider the New York sessions as a branch mark. The format which traders used for trading is shown here –

  • PP (Pivot Point) = (Low+High+Close)/3
  • Support and Resistance levels are calculated off PP by –
  • 1st Resistance (R1) = (2 X PP) – Low
  • 1st Support (S1) = (2 X PP) – High
  • 2nd resistance (R2) = PP + (High – Low)
  • 2nd support (S2) = PP – (High – Low)
  • 3rd resistance (R3) = High + 2(PP – Low)
  • 3rd support (S3) = Low – 2(High – PP)

These are the formulas used for calculation PP, now people who have a twisted relationship with mathematics will curse the fact that why they are trading at FX. Well, worry not as majority or almost every FX trading software has an inbuilt Pivot Point calculator which will do the job for you. Hence, don’t hesitate to use Pivot Points as your FX trading indicator as it comes with the pros of being an objective type. It is one of the most widely used FX indicators which is objective type and not derivative or subjective type. It gives fast and smooth trading signs which can help a trader in various ways. So, here you go, but yes before using PP for your trading, we advise to go through all the basics and study the indicator deeply.

How to use Pivot Points for Range Trading

How to use Pivot Points for Range TradingPivot Points are the indicators of objective types which Forex traders use for trading. These points help the traders to find the potential profit earning points. Experts suggest that the easiest way to use these Pivot Point level in your FX  trading, are by using them as natural resistance and support levels. It is considered that more significant the number a currency pair touches the PP level, stronger will be the trading level. The term is pivoting means that heading to the resistance and support level and then reversing. PP levels suggest that if the price is near the top resistance level, then it’s a selling sign and if the trading price is near the support level, then a trader can buy the currency pairs.

If a trader uses any other FX indicator along with Pivot Points, it increases the chances of getting more accurate and confirmed signals. Traders commonly use Candlestick patterns or doji along with PP to trade confidently. Pivot Point tests first, second and third support and resistance levels; however, the majority of the trading takes place between the first support and resistance level.

There comes incidence when the price bounces all the levels as it is FX trading and nothing is sure here. Experts suggest studying the Pivot Points carefully before using them in your FX trading as lack of proper knowledge about Pivot Points can hamper your trade. Also, if the combination is planned to use, it becomes critically important to study each one of the indicators used in commerce, with depth.

How to use Pivot Points to Trade Breakouts

Some traders like to trade when the Pivot Points gets on hold; these situations helps traders to make the market in their interest. But before you plan to try the holding situation next time, it is suggested to keep specific FX tools in your drawer and understand the ways of trading when Pivot Points are at a hold. There are two ways by which these trading breakouts can be used, they are a simple and easy way, and another one is the aggressive way. Both of these ways are used commonly, but be aware that if you opt to use the simple way in with a trader waits to retest the resistance and support level. He or she may miss out to the initial moves.

Role Reversals are the situation in which when a resistance level gets breaks, and it shape as a support-level. Likewise, after a support-level breaks, it becomes a resistance level. Hence, it is advised to play safe and simple in these situations. Traders often remain stressed and confused about thinking when to stop your place. Breakout trading is not like range trading where a trader looks for the support and resistance levels; here a trader seeks fast paces moves. It is advised to keep an eye on the economic calendar of the calendar and precisely on the countries whose currencies you are going to use in trade. Experts suggest using your trading knowledge regarding resistance, its candlestick patterns, and the momentum indicators to attain stronger signals for an efficient and profit generating trade.

How to Use Pivot Points to Measure Market Sentiment

Pivot Points are a versatile kind of FX indicator; this objective kind of sign is commonly used to determine the favorable resistance and support level. Anotherpopular strategy for using Pivot Points is to use these points in estimate market sentiments. These sentiment signals will help in finding the inclination of traders, whether they are laying as buyers or sellers. If the trading price breaks out at the top of the price level from Pivot Point, then it is considered as traders are behaving bullishly. As we know that FX market is not stable and values changes here every day and even in every session. There come chances when a Pivot Points users think that traders are behaving like a bear on a particular currency pair but suddenly the price reverses and breaks through the highest notch.

That’s Forex, and things like this are prevalent here. How traders are considering the current currency pair can change in the next FX session; therefore, it is suggested to use other indicators along with the Pivot Point to analyze the price level more precisely and accurately. Just by keeping the sword of Pivot Point cannot make you win the trade war at Forex fields, if so then there are heavy causalities. Means that if a trader buys the currency pairs if the price level is above the Pivot Points or sells the couple of the price level is below the PP level may suffer losses. Always, study the indicators before using along with other reliable ones.

Know the 3 Other Types of Pivot Points

Know the 3 Other Types of Pivot PointsWe have discussed the Pivot Points earlier and the way by which they are calculated as well. Though we support the simple way to get stick with for perming all the calculations, there are undoubtedly other ways to calculate the Pivot Points. It is good to get informed about them; however, we majority of technical trading calculators use the generic method only. The very first calculating type is the Woodie Pivot Point, in this type calculation are done as follows –

R1 = Pivot Point + High – Low
R2 = (2 X Pivot Point) – Low
S1 = (2 X Pivot Point) – High
S2 = Pivot Point – High + Low
Pivot Point = (High+Low+2C)/4

Second is Camarilla Pivot Point, the calculation in this type of Pivot Point is done by –

R1= C + ((H-L) x 1.0833)
R2= C + (H-L) x 1.1666)
R3= C + ((H-L) x 1.2500)
R4= C + ((H-L) x 1.5000)
S1= C – ((H-L) x 1.0833)
S2= C – ((H-L) x 1.1666)
S3= C – ((H-L) x 1.2500)
S4= C – ((H-L) x 1.5000)
Pivot Point= (H + L + C) / 3

Third type of pivotal calculations is called as Fibonacci Pivot Point, it is calculated as follows –

R1= PP + ((High – Low) x .382)
R2= PP + ((High – Low) x .618)
R3= PP + ((High – Low) x .382)

S1= PP – ((High – Low) x .382)
S2= PP – ((High – Low) x .618)
S3= PP – ((High – Low) x 1.000)
Pivot Point= (H + L + C) / 3

In all three Pivot mentioned above Point calculations, h stands for High, L stands for Low, and C stands for Closing Price.

Conclusion: Pivot Points

We have talked a lot about Pivot Points, and now it’s time to summarize the essential points of this Forex indicator. Pivot Points is the trading technique used by FX traders to identify the potential resistance and support level. The majority of traders reasonably utilizes these points as most of the currency pairs frequently fluctuates between PP points, precisely in between R1 (Resistance Level 1) and S1 (Support Level 1). Pivot Points can be calculated in four ways, which are listed below.

• Fibonacci
• Standard
• Camarilla
• Woodie

FX traders who are doing a range bound trading will always enter a buy order, near the identified support levels, and will exit the trade near the recognized resistance level. For, breakout FX traders these PP allows them to determine the key levels which need to be broke for a travel to succeed as a robust momentum journey. Sentiment FX traders consider these Pivot points to identify the bullishness or bearishness of a particular currency pair. Experts suggest that, though the Pivot Points are very useful and provides inside insights of the Forex market, they should always be used along with any other indicators like MACD, Candlesticks patterns, and RSI.

Pivot Points are used by traders to identify the potential support and resistance level, in the ongoing Forex trend. They are the simple technical tools used for having a productive trading session. So, before concluding the summary thing, we’ll again advise studying Pivot Points clearly and in-depth as partial knowledge will make it challenging to sail your trading boat in the FX Ocean.

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