Pivot points are very popular among the Forex traders. Some signal providers and systems use only pivot points for providing trading signals. Pivot points cane from live trading pits, where buyers and sellers perform trades physically. These traders created a formula which divides the chart into three different sections.
In order to find out the points, you need to know what High, Low and Close stand for. In this system, High is the pair’s highest price on the previous day, Low is the previous day’s lowest point and close is the ending price of that pair on the previous day. With this information in hand, you can calculate the Pivot Points on your own. Or, you can use the numbers provided by your broker.
Most, if not all the traders use the broker-provided pivot points. Some websites offer specialized online calculators for calculating pivot points on your own. No matter which method you choose, the end result will always be the same. If you are not sure, test with various sessions. Take note which works better for you and stick with that.
When you have applied pivot points in your chart, you will see that the chart is divided into three sections. Among them, PP is the middlemen. Anything above PP is bullish and everything below PP is bearish. R1, R2 and R3 are placed on top of PP; all of them are resistance levels. S1, S2 and S3 are the support levels, situated below PP.
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