✔️ Information reviewed and updated in November 2023 by Eduardo López
Today the currency market or currency trading is the largest financial market in the world. But, you ask yourself, what are technical indicators? Well, technical indicators like pivot points are mathematical calculations that are represented as lines on price charts, and help investors to identify certain trends and signals
That is why it is important to know well how this business works, and what are the necessary tools to be able to be successful. Although it is true that success comes from knowledge, a trading operator needs to learn about technical indicators in order to make better decisions.
➡Definition of Pivoting Points✨
This indicator is a technical analysis tool that many traders use in financial markets, including forex. Normally This indicator is used with traditional support and resistance to determine levels where prices are highly likely to rebound.
In fact, using pivot points and support / resistance together is highly recommended and accepted as one of the easiest and most effective trading strategies.
They are defined as the level at which market sentiment changes from bearish to bullish and vice versa. Similar to resistance or support, the pivot point is a level at which a trend can change.
➡What are pivot points for? ✨
The indicator lets the trading operator know if the price is close to strategic levels, and in this way it will make you take profits or take new positions in the market.
It is calculated daily and makes it possible to identify areas of resistance and supports. The pivot point is a key piece for many traders who buy and sell in these markets. Mainly, eThis indicator is used in short-term time frames to better take advantage of minor price variations.
➡How is it obtained? ✨
In order to calculate this indicator and the support and resistance levels, you must know the high (high), low (low) and close (close) of the previous day. The pivot point is the average of the high plus the low plus the close.
Support level 1 is calculated by multiplying the pivot by two and subtracting the high from the previous day. Resistance level 1, in turn, is obtained by multiplying the pivot by two and subtracting the slow from the previous day. Secondary support (S2) and resistance level 2 (R2) are calculated using the numbers (P, S1 and R1).
Finally, support (S3) and resistance 3 (R3) are calculated using the numbers (P, H, L).
Support levels can be used to make profit or to initiate trades. There are many platforms that calculate the S3 and R3 levels, which are very useful for days when there is great volatility. They can also calculate intermediate levels (M) which also offer extra information to the basic calculation.
Traders who are not as busy or are just starting out can use these points to improve their analysis.