Have you heard about “pivot points” in forex trading? Let’s break it down in easy terms. Pivot points are like signs that traders use to know where the market might go. It’s like a compass for trading. Let’s explore this fascinating concept in a straightforward way.

Calculating Pivot Points

Pivot points are not hard math. It’s the average of high, low, and close prices, sometimes even including the opening price. It looks like this:

Pivot Point (P) = (High + Low + Close) / 3

Or sometimes:

P = (Open + High + Low + Close) / 4

Others like the closing price more:

P = (High + Low + Close + Close) / 4

Here is an example of XAU/USD pivot points in 4-hour chart:

Take a look at what’s right in front of you – those lines running across your chart. See how they’re nicely marked out? It’s like having your own personal guide. How awesome is that?!

Whether you’re a seasoned trader or just starting out, pivot points tool is your go-to sidekick for making those smart moves in the forex market.

Support and Resistance

Pivot points bring friends: support and resistance. Think of support like a safety net, stopping prices from falling too low. Resistance is like a ceiling, stopping prices from going too high. Traders find these levels by adding or subtracting price ranges. They show where prices might change direction.

How to Use Pivot Points

Pivot points are like a map for trading. In a rising market, they might show when prices might stop going up. In a falling market, they might show where prices might stop falling. Traders watch these points for clues about what might happen next.

Central Pivot Range

For those who want more accuracy, there’s something called the Central Pivot Range (CPR). It’s like a zone instead of just one point. Traders use BC (Bottom Central) and TC (Top Central) points to make this zone. It helps to see a bigger picture.

Closing Thoughts

Now you know about pivot points in forex trading. They help you understand market trends and where prices might change. Just like a compass, they guide traders. If you’re new to trading or a seasoned pro, pivot points can be your secret weapon. Remember, the market might seem big, but pivot points make it simpler.