What is Pivot Point Calculator?
The Pivot Calculator is a powerful tool used in technical analysis to determine critical potential support and resistance levels in financial markets, particularly in trading scenarios like forex, stocks, and commodities. These levels are derived from the previous day’s price data and are invaluable for traders to make informed decisions about entry, exit, and risk management strategies.
The Pivot Calculator uses a specific formula to calculate these levels:
- Pivot Point (PP): This is the average of the previous day’s high, low, and closing prices. It serves as a central reference point for the trading day.
- Support Levels (S1, S2, S3): These levels are calculated below the Pivot Point and are seen as potential areas where the price might find support during a downward movement.
- Resistance Levels (R1, R2, R3): These levels are calculated above the Pivot Point and are seen as potential areas where the price might encounter resistance during an upward movement.
Traders use Pivot Points to gauge the overall market sentiment and make decisions based on whether the price is trading above or below these levels. If the price is above the Pivot Point, traders might consider bullish opportunities, while bearish opportunities could be more favourable if it’s below. The Support and Resistance levels also help traders set stop-loss orders, determine profit targets, and identify potential reversal points.
The Pivot Calculator is a dynamic tool often used alongside other technical indicators and chart patterns to form a comprehensive trading strategy. It assists traders in understanding the potential turning points in the market and aids in making timely and informed trading decisions. By plotting these calculated levels on price charts, traders gain insights into the ebb and flow of market sentiment and can confidently navigate the complex trading world.