Pivot points are a darling to most traders and are undoubtedly one of the most popular technical tools used by Forex traders, regardless of their level of experience in the markets. Essentially pivot points are a price level which indicates the market’s sentiment or direction.
This article seeks to unpack the pivot points and how they can be of use to traders. This will be done through defining what pivot points and the calculation thereof and how the various pivot point types can be of use to the trader.
What are Pivot Points?
Pivot points can be defined as a technical analysis indicator used to determine the overall trend of the market over different time frames. It can be put simply as benchmarks that traders use to get a feel for the way the market is moving. A bearish sentiment is formed when the price goes below the pivot point level, and in contrast, the bulls are in play if the price goes beyond the pivot point level.
Support levels are levels where the price tends to find support as it falls. That is, the price at which it is more likely to "bounce" off this level rather than break through it. However, in the event of a break through, by an amount exce…