This article looks at exactly what a forex pivot point is and how to calculate one.
Forex pivot points can be calculated using this simple formula:
(Previous high + previous low + previous close) / 3
So for example if on the daily forex chart for GBP/USD the follow was true:
High 2
Low 1.98
close 1.99
The pivot point would be (2+1.98+1.99)/3
In the instance the pivot point would be 1.98.
Pivot points can be worked out from any time period. You just need to use the previous candle for the calculation.
Pivot points can be very important in forex trading because some traders place there stop losses and take profit points at them. As a result they can act as support and resistance and the market will often “bounce” at them.
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