How does the pivot calculator work?
First, traders can select from five different Pivot Point calculation methods: Floor, Woodie, Camarilla, Tom De Mark's and Fibonacci.
The difference between these methods is the number of levels considered and displayed:
For instance, let us calculate pivot points for GBP/USD for the next trading session using the Standard (Floor) method and adding the previous period's data.
High price: Here we will type in the highest price that the GBP/USD pair reached on the previous trading session, for example, 1.30452.
Low price: Now, we will type in the lowest price that the GBP/USD pair reached on the previous trading session, for example, 1.24651.
Open price: Here, we type in the closing price for the GBP/USD pair on the previous trading session, for example, 1.25255.
Close price: Finally, we type in the closing price for the GBP/USD pair on the previous trading session, for example, 1.26254.
* This is an educational tool and results should not be construed as investment advice.
Understanding Pivot Points
The floor Pivot Points, also known as Classical Pivots and are the most basic and popular type of pivots used in Forex. These floor Pivots are price-based support and resistance levels and are calculated using a prior period's high, low, and close prices.
R1 = (2 x Pivot Point) - Low (previous day)
S1 = (2 x Pivot Point) - High (previous day)
R2 = Pivot Point + (R1 - S1)
S2 = Pivot Point - (R1 - S1)
R3 = Pivot Point + (R2 - S2)
S3 = Pivot Point - (R2 - S2)
Woodie's Pivot Points are a unique type of Pivot Points made up of multiple key levels and calculated from past price points, in order to frame trades in a simplistic manner.
They vary from the floor pivots in a way they are calculated as they give more weight to the Close price of the previous period.
R1 = 2 x Pivot Point - Low (previous day)
S1 = 2 x Pivot Point - High (previous day)
R2 = Pivot Point + High (previous day) - Low (previous day)
S2 = Pivot Point - High (previous day) + Low (previous day)
R3 = High (previous day) + 2 x [Pivot Point - Low (previous day)]
S3 = Low (previous day) - 2 x [High (previous day) - Pivot Point]
R4 = R3 + High (previous day) - Low (previous day)
S4 = S3 - High (previous day) + Low (previous day)
Camarilla Pivot Points is a versatile pivot point indicator that comprises eight profitable levels which resemble support and resistance values for a current trend. These support points serve as a great indicator and are super popular as they help traders to set the right stop loss and profit target orders.
R1 = Close (previous day) + [High (previous day) - Low (previous day)] x 1.1/12
S1 = Close (previous day) - [High (previous day) - Low (previous day)] x 1.1/12
R2 = Close (previous day) + [High (previous day) - Low (previous day)] x 1.1/6
S2 = Close (previous day) - [High (previous day) - Low (previous day)] x 1.1/6
R3 = Close (previous day) + [(High (previous day) - Low (previous day)] x 1.1/4
S3 = Close (previous day) - [(High (previous day) - Low (previous day)] x 1.1/4
R4 = Close (previous day) + [High (previous day) - Low (previous day)] x 1.1/2
S4 = Close (previous day) - [High (previous day) - Low (previous day)] x 1.1/2
Another popular method of calculating pivot points to forecast the future of the trend is Tom DeMark's Pivot Points, which are not pivot points exactly but are the predicted lows and highs of the period.
If Close > Open: X = 2 x H + L + C
If Close = Open: X = H + L + 2 x C
R1 = X / 2 - L
S1 = X / 2 - H
Fibonacci Pivot Points work as one of the most popular types of forex indicators used to find support and resistance. It works by calculating the pivot points starting with a base one and using the Fibonacci series of numbers. The most popular levels monitored by the traders are the 38.2% and the 61.8% retracement levels.
Resistance 1 = Pivot Point + ([(High (previous day) - Low (previous day)] x 0.382)
Support 1 = Pivot Point - ([(High (previous day) - Low (previous day)] x 0.382)
Resistance 2 = Pivot Point + ([(High (previous day) - Low (previous day)] x 0.618)
Support 2 = Pivot Point - ([(High (previous day) - Low (previous day)] x 0.618)
Resistance 3 = Pivot Point + ([(High (previous day) - Low (previous day)] x 1.000)
Support 3 = Pivot Point - ([(High (previous day) - Low (previous day)] x 1.000)
Why are Pivot Points important?
Pivot Points are considered to be one of the leading indicators to traders due to their predictive qualities. They serve as an indicator of the overall market trend and help traders determine how prices could potentially turn.
This is extremely important as the price fluctuations are the backbone of Forex and essentially trigger one's buy or sell decision.
There are no rules as to what kind of trader uses the Pivot Point system. In fact, we say pivot points for all as understanding the Pivot Point analysis is undeniably a valuable addition to your trading toolbox.
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