Forex daily pivots are an essential tool for traders who wish to analyze the market’s direction, identify key support and resistance levels, and make informed trading decisions. These pivots are calculated based on the previous day’s price action and are used to estimate potential price movements for the current day.
One of the most popular methods of calculating Forex daily pivots is the New York Open method. This method involves using the opening price of the New York session, which takes place at 8:00 am EST, as the starting point for the pivot calculations.
To calculate the daily pivot, traders add the high, low, and close price of the previous day and divide the sum by three. This calculation provides the main pivot point, which is considered the most critical level for the day’s trading.
From the main pivot point, traders can calculate additional support and resistance levels by using the following formulas:
– First support level (S1) = (2 x Pivot point) – High of the previous day
– Second support level (S2) = Pivot point – (High – Low) of the previous day
– Third support level (S3) = Low of the previous day – 2 x (High – Pivot point)
– First resistance level (R1) = (2 x Pivot point) – Low of the previous day
– Second resistance level (R2) = Pivot point + (High – Low) of the previous day
– Third resistance level (R3) = High of the previous day + 2 x (Pivot point – Low)
These support and resistance levels are critical as they can help traders identify potential entry and exit points for their trades. For example, if the price is approaching a support level, a trader may decide to go long, expecting the price to rebound from that level. Conversely, if the price is approaching a resistance level, a trader may decide to go short, expecting the price to reverse from that level.
When it comes to trading on Mondays, Forex daily pivots can be particularly useful. Mondays can be volatile as traders react to news and events that occurred over the weekend. However, because the New York session is the first major session to open after the weekend, the New York Open method can provide a reliable starting point for calculating daily pivots.
It is important to note, however, that Mondays can also be unpredictable, and traders should exercise caution when using pivot points to make trading decisions. In some cases, the price may break through a support or resistance level, indicating a potential trend reversal. Traders should always use other technical indicators and fundamental analysis to confirm their trading decisions.
In conclusion, Forex daily pivots are a valuable tool for traders looking to identify key support and resistance levels, estimate potential price movements, and make informed trading decisions. The New York Open method is a popular way of calculating daily pivots, and it can be particularly useful for trading on Mondays when the market can be volatile. However, traders should always exercise caution and use other technical indicators and fundamental analysis to confirm their trading decisions.
