Pivot Points are commonly used by day traders because they work better in fast moving environment with a short-term focus.

Day traders always look at the previous day’s high, low and close to calculate a Pivot Point for the current trading day. With this Pivot Point as the base, further calculations were used to set support 1, support 2, resistance 1, and resistance 2.

These levels are also used by traders while trading to identify entry and exit levels.

# Classic

The classic pivot points are the most basic and popular type of pivots. The pivot point is interpreted as the primary support/resistance level – the point at which the main trend is determined. First-third level resistance and support points serve as additional indicators of possible trend reversal or continuation.

Pivot (P) = (H + L + C) / 3

Resistance (R1) = (2 x P) – L

R2 = P + H – L

R3 = H + 2 x (P – L)

Support (S1) = (2 x P) – H

S2 = P – H + L

S3 = L – 2 x (H – P)

# Woodie

Woodie’s pivot points are similar to classic pivot points, the difference being is that more weight is given to the Close price of the previous period.

Pivot (P) = (H + L + 2 x C) / 4

Resistance (R1) = (2 x P) – L

R2 = P + H – L

Support (S1) = (2 x P) – H

S2 = P – H + L

# Camarilla

Camarilla pivot points are a set of eight very probable levels which resemble support and resistance values for a current trend. The most important is that these pivot points work for all traders and help in setting the right stop-loss and profit-target orders.

R4 = (H – L) x 1.1 / 2 + C

R3 = (H – L) x 1.1 / 4 + C

R2 = (H – L) x 1.1 / 6 + C

R1 = (H – L) x 1.1 / 12 + C

S1 = C – (H – L) x 1.1 / 12

S2 = C – (H – L) x 1.1 / 6

S3 = C – (H – L) x 1.1 / 4

S4 = C – (H – L) x 1.1 / 2

# DeMark’s

Another popular method of calculating the pivots to forecast the future of the trend is Tom DeMark’s pivot points, which are not pivot points exactly, but are the predicted lows and highs of the period.

If Close < Open: X = H + 2 x L + C

If Close > Open: X = 2 x H + L + C

If Close = Open: X = H + L + 2 x C

New High = X / 2 – L

New Low = X / 2 – H

# Why are pivot points important when trading forex.

You can use pivot points to generate trade signals. Pivot points are leading indicators therefore can be used to identify signals to trade.

The pivot point levels can show where the market is likely to stabilize or bounce when in an uptrend or downtrend. Relying on that, you can easily plan a head and get clear entry point.

Pivot points can also be used to identify major support and resistance levels in the market. This helps you to know when to enter and exit trade.

You can also use pivot points to measure the market sentiment. That is, you will be able to know whether there are more buyers in the market or sellers. Read more on how to use pivot points to measure market sentiment.

Pivot points can be used in identifying reversal or breakout areas. Read on to find out how to use these support and resistance levels.Read more

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