Pivot points are widely used by professional traders and market makers to identify key support and resistance levels in the forex market. These levels often signal potential price turning points—helping traders make informed decisions on whether to buy, sell, or hold.
📌 Why Pivot Points Matter
Pivot points are objective—unlike other indicators that can be influenced by trader bias or interpretation. They are calculated using a fixed formula, meaning everyone sees the same levels, making them a favorite among short-term forex traders.
These levels are similar to Fibonacci retracement zones in how they can become self-fulfilling due to widespread usage—but with pivot points, there’s less subjectivity. No need to guess the swing high or low—they’re based on previous session prices.
🧠 How Do Traders Use Pivot Points?
Pivot points help identify possible reversals or breakouts:
- 📉 Range traders use them to spot bounce points for placing buy/sell orders.
- 🚀 Breakout traders use them to identify crucial levels that price must break for strong continuation.
Whether you’re a scalper or an intraday trader, pivot points can be a powerful addition to your trading strategy.
📊 Example: Pivot Points on EUR/USD
On an hourly chart of EUR/USD, pivot points show clear horizontal levels that may act as support (S1, S2, S3) or resistance (R1, R2, R3).
These levels are automatically plotted on many trading platforms—making it easier to anticipate price reactions.
🧩 Pivot Point Terminology
| Abbreviation | Meaning |
|---|---|
| PP | Pivot Point |
| S1, S2… | Support Levels |
| R1, R2… | Resistance Levels |
🔁 Don’t assume S1 must always be support or R1 must always be resistance—price behavior around these levels is key, and we’ll cover this more in the next sections.
📘 What You’ll Learn Next
In the upcoming lessons, we’ll explore:
- How to calculate pivot points step-by-step.
- Different types of pivot point systems (Standard, Fibonacci, Camarilla, etc.).
- How to integrate pivot points into your daily trading strategy.
📌 Bookmark this guide and follow along to make pivot points a core part of your forex trading toolbox.
🧠 Pro Tip: Even if you’re a beginner, understanding pivot points will give you an edge in spotting strong entry and exit levels.
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