What exactly are pivot points?
Pivot points are used by professional traders and market makers to identify probable support and resistance levels.
Simply explained, a pivot point and associated support/resistance levels are areas where price movement can shift direction.
What makes pivot points so appealing?
This is due to the fact that they are OBJECTIVE.
There is no discretion involved, unlike some of the other indicators we’ve already taught you about.
Forex pivot points are comparable to Fibonacci levels in many ways. Because there are so many people interested in those levels, they almost become self-fulfilling. The main difference between the two is that with Fibonacci, identifying Swing Highs and Swing Lows is still subjective.
Forex traders often calculate pivot points using the same way.
Many traders monitor these levels, and you should as well. Pivot points are especially valuable for short-term traders attempting to capitalize on minor market fluctuations.
Forex traders, like typical support and resistance levels, can trade the bounce or breach of these levels.
Pivot points are used by range-bound traders to detect reversal points. They consider pivot points to be regions where they can place buy or sell orders.
Forex breakout traders employ pivot points to identify crucial levels that must be broken for a move to be regarded as a true breakout.
On a 1-hour chart, here is an example of EUR/USD pivot points:
Horizontal support and resistance levels are drawn on your chart, as seen above.
And notice how nicely they’re labeled for you! That’s so convenient!
Pivot Point Linggo
Here’s a quick rundown of what those abbreviations stand for:
Pivot Point is abbreviated as PP.
The letter S stands for Support.
The letter R stands for resistance.
But don’t get too caught up in the notion that “S1 must be support!” or “R1 must be resistant.”
We’ll explain later why.
In the classes that follow, you will learn how to calculate forex pivot points, the various types of pivot points, and, most importantly, how to incorporate pivot points into your forex trading arsenal!
Next Lesson: How to Calculate Pivot Points?