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CompassFX

Forex Pivot Point Calculator

To use the Forex Pivot Point Calculator, enter Yesterday's High, Low, and Close prices of a currency pair and press the "Calculate" button.  The Pivot levels will automatically appear in the "Results" area of the table below.  After a calculation is complete, you can remove the price points in the Results column by pressing the "Clear" button.

 

Yesterday's Prices

High       Low:       Close:

 

Range Results Formulas

Above Normal Trading Range

  R 3

    

 R 3 = (Pivot – S2) + R1
 R 2
 R 2 = (Pivot – S1) + R 1
Normal
Trading Range		  R 1
 R 1 = (2 x Pivot) – Low
Pivot  
 Pivot = (H + L + C) / 3
S 1
 S 1 = (2 x Pivot) – High
Below Normal Trading Range S 2

 S 2 = Pivot – (R 1 – S 1)
S 3  

  S 3 = Pivot – (R2 – S1)

 

Experienced traders often speak of price nearing a certain support or resistance level, each of which is important because it represents a point at which a price movement is expected to occur. But how do these traders come up with these so-called levels?

One of the most common methods is using pivot points. The reason pivot points are so popular is that they are predictive as opposed to most lagging technical indicators. A trader can use the information of the previous day to calculate potential market turning points for the current day. Not surprisingly, the market reacts as price reaches pivot point levels because so many traders follow this technique. Let's take a look at how to calculate and interpret pivot points.

In a typical business day, most markets have an open, high, low and close for the day. With the Forex market operating 24 hours, generally 5:00 PM Eastern is the previous day's close is also the open of the new day. The calculation for determining the pivot point for the Forex is: (Previous Day's High + Previous Day's Low + Previous Day's Close) / 3

The pivot point is a key level at which traders consider the direction of the market for the day. If the market opens and remains above the pivot point then the bias for the day is Long. If the market opens and remains below the pivot point then the bias for the day is for Short. The pivot point itself is the primary support/resistance depending on the direction of the market.

Using pivot point calculation with some simple arithmetic, traders can also derive a series of resistance and support price levels. The pivot point and the support and resistance levels are collectively known as pivot levels.

The three most important pivot levels are the first resistance level (R1), first support level (S1), and the actual pivot point. The distant between the R1 and S1 represents the normal trading range.

Additional pivot levels extend either above or below the normal trading ranges. When price movement reaches R2 or R3, the market may be overbought. When price moves to S2 or S3, the market may be oversold. In the case of these extended levels, traders are more inclined to use these levels for exits rather than entries.

A typical pivot level trade set-up would be for the market to open above the pivot point and then stall slightly at R1 then go on to R2. A trader can set an entry order on a break of R1 with a target of R2. If the market is really strong, close half at R2 and set an exit target at R3 with the remainder of your position.

Keep in mind, pivot points are short-term indicators for the day of trading and need to be recalculated for the next day.

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