Detailed Description of Forex Pivot Points 1.0

Forex Pivot Points is a freeware offline Pivot Points calculator.

A pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa. They work simply because many individual forex traders and investors, as well as bank and institutional traders use and trust them. It is known to every trader that the pivot point is an important measure of any market's strength and weakness.

To calculate daily pivot points you need the High, Low, and Close Price of the previous day. Simply set these three prices in the Forex Pivot Point Calculator and it will give you the values.

Here are the used formulas for calculating daily pivot points:

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

Resistance 1: R1 = 2 * P - Low
Resistance 2: R2 = P + (R1 - S1)
Resistance 3: R3 = High + 2 * (P - Low)

Support 1: S1 = 2 * P - High
Support 2: S2 = P - (R1 - S1)
Support 3: S3 = Low - 2 * (High - P)

To calculate weekly pivot points, apply the same formulas, but using the High, Low, and Close Price of the previous week instead of the previous day.

As you can see from the above formulas, just by having the previous day's high, low and close you eventually finish up with 7 points, 3 resistance levels, 3 support levels and the actual pivot point.
If the market opens above the pivot point then the bias for the day is in favoir of long trades.
If the market opens below the pivot point then the bias for the day is in favor of short trades.

The three most important pivot points are R1, S1 and the actual pivot point. The general idea behind trading pivot points is to look for a reversal or break of R1 or S1. By the time the market reaches R2, R3 or S2, S3 it will already be overbought or oversold and these levels should be used for exits rather than entries.

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