How to Calculate Pivot Points
Trading Forex with Pivot Points is used in order to predict support and resistance levels. Support and Resistance levels are used as cues to indicate when a trade should be executed.
When a currency is traded above the pivot point, this is known as the purchase zone (long). When a currency is traded below the pivot point, this is known as the sell zone (short).
*In a bearish market, a drop below the pivot leads to the first support point, which represents the strike price for target profits. If the first support point loses ground and the pair continues to decline, the second support point represents another target.
*In a bullish market, a market price that rises above the pivot leads to the first resistance point, which represents the strike price for target profits. The second resistance point would represent a second target.
Once the resistance/support point is breached its role is now the opposite, meaning that a breached resistance point now becomes a support point and vice versa.