If you are learning to trade forex, “pivot points, are one of the terms you may come across. Pivot points are a group of support and resistance that is estimated before time to offer insight as to the position to either place a buy or sell order of a currency pair. Pivot points are used in forex and as in well in the futures markets.
As opposed to other types of trading indicators, the pivot point’s indicators are inherently predictive. To use the pivot point indicator, your main concern is to look for the next three support and the subsequent three resistance levels. Although it is a very good trading indicator, just like you would do with other trading indicators, you need to confirm the signals with the use of price action or signals like the last support level.
Pivot points study concentrates on the correlation that exists between the high, low, and closing prices for every trading day. The implication of this is that you make use of the trading day’s prices of the day before to estimate the pivot point for the day in question.
The pivot point is the main concentration of the indicator is taken to be a representation of the “fair value” for the session of the market.
When there is an increase in price and up to a specific point, it turns around; it is referred to as resistance. On the other hand, if the price was falling initially and after sometimes, it starts to rise, it is referred to as support. This indicator helps to chart out what the “fair market value is and provide information about three prospective points in both directions which are referred to as support one, support two, support three, and on the flipside as resistance one, resistance two, and resistance three to serve as the principles.