A forex pivot point is an indicator developed by floor traders in the commodities markets to determine potential turning points, also known as pivots. Forex pivot points are calculated to determine levels in which the sentiment of the market could change from bullish to bearish. Currency traders see pivot points as markers of support and resistance.
Day traders will use pivot points as a way to determine when market sentiment has gone from bullish to bearish or vice versa.
Because pivot points are thought to figure well in very liquid markets, the spot forex market could also be the right place to use them. Day traders use the calculated pivot points to work out levels of entry, stops and profit taking by trying to work out where the bulk of other traders could also be doing an equivalent . Forex pivot point calculators are available freed from charge across the web through retail forex brokers and third-party websites.
Pivot points are often points that correspond to trend lines, Fibonacci levels, moving averages, previous highs/lows or closes and lots of more indicators, counting on the trader’s philosophy.
While pivot points can pertain to different levels, some are derived from basic formula using highs, lows, and previous closes using the following formula-
Forex Pivot Point= (High+Low+Close)/3