If you’re a forex trader, then you know that pivot points are an important part of your trading strategy. But did you know there’s a pivot point calculator that can help you make even more precise trades?
Don’t worry if your answer is no. We are going to introduce you to the pivot calculator now and show you how to use it for day trading.
What is a pivot point?
The pivot point is an important technical analysis indicator that traders use to determine the overall trend of an asset over different time frames. This calculated average includes only closing prices from previous trading days, which makes it more accurate than other methods for figuring out where markets might be headed next.
The pivot point is a key indicator, but it’s also supported by other levels that traders can use to anticipate where the price might find resistance or support. If the price moves through these levels, it indicates whether the trend is going up or down.
How to calculate pivot points?
The idea of using pivot points to time your trades is a common one, but it’s also possible in some cases for traders depending on the type and size of their position. If you’re looking at longer-term investing strategies then this might not be quite right – as we want robustness over shorter periods too.
However, if you are a day trader, then take note because by taking advantage of the previous week’s data (or even the last) chances can arise that could lead to greater profits than usual.
There are different ways to calculate pivot points, but the five-point system is the most commonly used. This system uses the previous day’s high, low, and close prices, as well as 2 support levels and 2 resistance levels (totaling five price points), to derive a pivot point.
In 24-hour markets, such as the Forex market, pivot points are often calculated using a variety of timeframes and reference points. Some traders opt to use 23:59 to close the trading session and 00:00 GMT for the opening of the new one.
Pivot points limitations
Pivot points are a calculation that some traders find useful, but others may not. There is no assurance that the price will stop at, reverse at, or even reach the levels created on the chart. Other times the price will move back and forth through a level.
Note as a reminder that indicators should only be used as part of a complete trading plan.
To sum it up, the pivot point calculator is a simple yet effective tool that can be used by day traders to find potential support and resistance levels. By applying this concept to your trading, you will be able to improve your skills and make more informed decisions when entering and exiting trades. So don’t wait any longer, start practicing with the pivot point calculator today.