Learn about Forex Pivot Points with our Pivot Point Calculator

Forex pivot points have been used as a forex trading strategy for years. It was originally developed by the floor traders so they could have a way of understanding where the market was heading throughout the course of the day through a few simple calculations.

If you would like to skip our pivot points explanation on how to do this manually, you can just scroll down to our electronic forex pivot points calculator below.

What are Pivot Points?

The pivot point is the level at which the market direction changes for the day. Using the previous day's high, low, and close, you can derive a number of points, which can be critical support and resistance levels. All the pivot, support, and resistance levels you calculate as known as pivot levels.

Most markets are open 24 hours a day so you should use 5pm EST as the open and close.

Pivot points are a great tool because they allow you to predict the next days potential turning points, giving you an upper hand on your trades throughout the day. Most traders use pivot points so you should not be surprised to see that the market reacts at the levels you calculate. This gives you your opportunity to rade.

Calculating Forex Pivot Points

Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

The three most important pivot points are Resistance 1 (R1), Support 1 (S1), and the actual pivot point. The general idea forex pivot points are to look for a reversal or break of R1 or S1. By the time the market reaches the other resistance (R2,R3) and support points (S2,S3) the market will be overbought or oversold. These levels should be used for exits rather than entries.

In and ideal situation, the market would open above the pivot level and then stall for a short period at R1 before going reaching R2. You would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of your position.

You can watch this informative video on pivot points. It talks about all the things I have mentioned here. It goes into a lot of detail about S and R points.

But as many traders know, nothing in the trading world goes ideally. So you have to work with the day as it progressed. Usually, if the market opens below the pivot point then the bias for the day is for short trades. If the marketopens above the pivot point, then the bias for the day is long trades.