Pivot Calculator
Pivot Points are used to help a forex trader calculate Support and Resistance levels.
The Support level is defined as the price level at which intensive buying will probably lead to the price decreasing – it indicates an imminent down-trend.
The Resistance level can be defined as the price level at which intensive selling would probably lead to the price increasing – indicating an imminent up-trend.
So this means Support and Resistance levels are quite useful cues to indicate when a trade should be executed.
If a currency is traded above the pivot point, this is referred to as the purchase zone (long). If a currency is traded below the pivot point, this is referred to as the sell zone (short).
If the market is bearish, a drop below the pivot point leads to the first Resistance point. This represents the strike price for projected profits. If the first Support point loses ground so the currency pair continues to decline, the second Support point represents another target.
If the market is bullish, a market price rising above the pivot point leads to the first Resistance point. This represents the strike price for projected profits. If the price continues to rise, the second Resistance point would represent a second target.
As soon as a Resistance or Support point is breached its role becomes the opposite – this means that a breached Resistance point becomes a Support point and vice versa.
How to Use a Pivot Calculator
Step 1: Define the desired time period you wish to calculate the pivot point for
Step 2: Enter the highest price of this time period in the \’high\’ box
Step 3: Enter the lowest price of this time period in the \’low\’ box
Stap 4: Enter the closing price of the time period in the \’close\’ box
Step 5: Click \’calculate\’ to make the desired calculation
Posted on 25th January 2009
Under: Forex, Forex Education, Investing, Trading, Trading Signals | 1 Comment »