Forex Pivot Point in Trading
The pivot points are most widely used Technical Indicators in Day Trading. The Pivot Point will indicate that the support and the resistance levels are in areas in which it changes the direction of price movements.
Calculations of Pivot Point
The pivot point is also called the Central Pivot point. The central pivot point is the main of the support and the resistance level. To calculate the formula of the Pivot point is as given below:
Pivot Point (PP) = (High+ Low+ Close)/3
Support 1(S1) = (PP*2) – Previous High
Support 2(S2) = PP – (Previous High- Previous Low)
Resistance 1(R1) = (PP*2) – Previous Low
Resistance 2 (R2) = (PP) + (Previous High- Previous Low)
As we can see the price levels are based on the high, low, and close of the previous day, the broader the range between these values the larger the distance between levels on the following trading day. Likewise, the lesser the trading range, the lower the distance between levels will be the following day.