How to calculate Pivot Points

 

How to calculate Pivot Points

How to calculate Pivot Points

The pivot points and their respective levels of support and resistance are calculated using the opening, high, low, and closing levels of the last trading session.

Since forex is a 24 hour market, many traders use New York closing time (22:00 Spanish time / 4 pm EST).

To calculate the pivot point we use the formula we see below:

Pivot Point (PP) = (Highest point + lowest point + closing price) / 3

The levels of support and resistance are calculated based on the Pivot Point (PP):

- First level of support and resistance:

First level of support (SI) = (2 x PP) - highest level

First resistance level (RI) = (2 x PP) - lower price

- Second level of support and resistance

Second level of support (S2) = PP - (highest price - lowest price)

Second resistance level (R2) = PP + (highest price - lowest price)

But do not worry! You do not have to do these calculations manually. The software of your trading platform will do it automatically.

You should remember that some of these programs also give additional information of the pivot points as a third level of support and resistance and intermediate levels (points between the pivot point and the supports and resistances).

These extra levels do not matter as much as the top five (PP plus the two levels of support and resilience), but it's no use paying attention.

Here is an example:

[caption id="attachment_778" align="aligncenter" width="525"] How to calculate Pivot Points?[/caption]

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.