Pivot Points are a type of support and resistance levels that are used by many intraday and short term traders. When trading pivot points, many of the same rules are in force as with other types of support and resistance trading techniques. Many traders keep a watchful eye on daily pivot points, as they are considered to be key levels at the forex pivot points strategy timeframe.

We will go through the basic aspects of Forex Pivot Points and we will discuss a couple trading strategies that can be used with daily pivot points. Forex pivot points are calculated horizontal price levels on the chart. These levels show potential areas where the price can reverse, especially during the first touch of these levels. The Standard Pivot point calculation is quite simple.

We should first calculate the main daily pivot point. 5 market, there is some confusion as to which time to use for the daily market opening and closing. GMT for Forex market opening time. When you get the PP, you can start calculating the further upper and lower pivot points. These are called first, second, third pivot resistance levels, and first, second, third, pivot support levels.

Since you now have the basic pivot point, you can now calculate the first support and resistance. We have gone thru the calculations above so that you can understand how these levels are calculated. We will now discuss some quick ways to calculate pivot points without having to do the manual calculations daily. When you apply the basic pivot point and the three support and resistances, there will be 7 different levels. As you have seen above, it can be a bit tedious to perform the calculations manually. There are different options to get the pivot points without doing the calculations above manually. There are many online pivot point calculators on the net.

When you open a pivot point calculator, you will be required to add the three price action variables. These are the daily high, the daily low and the close. Most of the trading software available today will have a pivot indictor that will calucatate these levels for you automatically and plot them on your chart. First, check the list of indicators your trading platform offers. If you don’t have a pivot indicator there, you should do some research. You can find many Pivot Point Indicators online, which you could simply add to your platform. Browse the net and you will definitely find a pivot point indicator available usually for free somewhere.

You may have to import the indicator and then extract the files in the indicators folder of your trading platform. Once you have done this, you will be able to apply the pivot point indicator directly on your chart. USD March 2, 3, and 4, 2016. The horizontal lines on the chart are the pivot points. The blue line is the central pivot point.

The lines above the main pivot point are R1, R2, and R3. We also put three vertical lines on the chart. These three lines separate the different trading days. Notice that the pivot levels of every trading day are lined differently. This is so, because each trading day has different daily high, low and close values. In this manner, the pivot levels are different too. This is why there is a rapid switch in the levels of the pivot lines for every trading day.

There are few basic rules when trading pivot points. Be bearish when the price is below the main pivot point. Be bullish when the price is above the main pivot point. Go long if the price bounces from S1, S2, or S3.

Go short if the price bounces from R1, R2, or R3. Since we have discussed the structure of the pivot points and the way they are calculated, it is now time to demonstrate pivot trading using some chart examples. The chart shows the pivot points’ price action for 5 consecutive days. The circles show moments when the price consolidates and hesitates in the area of a pivot point. The arrows show moments when the price finds support or resistance around a pivot point level. In this example we see price hesitate around a level 4 times and in 8 instances we have a price reversal after interaction with a pivot point.