Welcome! Dear Traders,you are reading my forex trading experiences. Forex trading is a very profitable and very risky business opportunity. If you are a beginner, calm down,have a cup of coffee, and convince yourself that you need to study hard to win in forex trading. Obviously, the task is not easy as the statistics claim that only 5% traders win in forex trading. If you are determined, serious,and hard working, you can surely be included in the group of winners.

## Monday, February 9, 2015

### HOW TO CALCULATE PIVOT POINTS

According to investopedia.com "pivot points" is defined as "A set of indicators developed by floor traders in the commodities markets to determine potential turning points, also known as "pivots". Forex pivot points are calculated to determine levels in which the sentiment of the market could change from "bullish" to "bearish." Currency traders see pivot points as markers of support and resistance."

Before we turn to learn the application of pivot point analysis in forex trading, we should learn the ways to calculate the pivot points. There are four popular ways to calculate pivot points. You can find the formulas to calculate pivot points in below.

Standard Pivot Point
The formulas to calculate pivot point, support and resistance levels under the standard method are as follows.
First resistance (R1) = (2 x PP) – Low
First support (S1) = (2 x PP) – High
Pivot point (PP) = (High + Low + Close) / 3
Second resistance (R2) = PP + (High – Low)
Second support (S2) = PP – (High – Low)
Third resistance (R3) = High + 2(PP – Low)
Third support (S3) = Low – 2(High – PP)

Woodie Pivot Point
The formulas to calculate pivot point, support and resistance levels under the woodie method are as follows.
Second resistance (R2) = PP + High – Low
First resistance (R1) = (2 X PP) – Low
Pivot point (PP) = (H + L + 2C) / 4
First support (S1) = (2 X PP) – High
Second support (S2) = PP – High + Low
C – Closing Price, H – High, L – Low

Camarilla Pivot Point
The formulas to calculate pivot point, support and resistance levels under the camarilla method are as follows.
Fourth resistance (R4) = C + ((H-L) x 1.5000)
Third resistance (R3) = C + ((H-L) x 1.2500)
Second resistance (R2) = C + ((H-L) x 1.1666)
First resistance (R1) = C + ((H-L) x 1.0833)
Pivot point (PP) = (H + L + C) / 3
First support (S1)  = C – ((H-L) x 1.0833)
Second support (S2)  = C – ((H-L) x 1.1666)
Third support (S3)  = C – ((H-L) x 1.2500)
Fourth support (S4)  = C – ((H-L) x 1.5000)
C – Closing Price, H – High, L – Low

Fibonacci Pivot Point
The formulas to calculate pivot point, support and resistance levels under the fibonacci method are as follows.
Third resistance (R3) = PP + ((High – Low) x 1.000)
Second resistance (R2) = PP + ((High – Low) x .618)
First resistance (R3) = PP + ((High – Low) x .382)
Pivot point (PP) = (H + L + C) / 3
First support (S2) = PP – ((High – Low) x .382)
Second support (S2) = PP – ((High – Low) x .618)
Third support (S2) = PP – ((High – Low) x 1.000)
C – Closing Price, H – High, L – Low

Which pivot point method is best ?
I personally prefer standard pivot point method, but it does not mean that you will do the same. Apply the all of the pivot points in you forex trading and find the best one for you.

Pivot point will enrich your trading strategy, if it is applied with other technical tools, fundamental and sentiment analysis.

In my next post I will write about trading range and breakouts with pivot points. If you have any question regarding pivot point calculation you can drop a comment below. 