Forex trading involves predicting the movements of currency pairs, and one of the best tools for this is the daily central pivot point. A pivot point is a technical analysis indicator used to determine the overall trend of the market, and it helps traders identify potential support and resistance levels. The central pivot point is the most important level, and it is used to forecast the daily market direction. In this article, we will explain what the daily central pivot point is and how to forecast it.
What is the daily central pivot point?
The daily central pivot point is a level that is calculated by taking the average of the high, low, and close prices of the previous trading day. It is the most important level of the pivot point system, and it is used as a reference point for the rest of the support and resistance levels. The central pivot point is also known as the pivot level or the main pivot point.
How to calculate the daily central pivot point?
The calculation of the daily central pivot point is straightforward, and it can be done manually or with the help of trading software. The formula for calculating the daily central pivot point is as follows:
Central Pivot Point (PP) = (High + Low + Close) / 3
Where,
High = the highest price of the previous trading day
Low = the lowest price of the previous trading day
Close = the closing price of the previous trading day
Once you have calculated the central pivot point, you can use it to calculate the support and resistance levels.
Resistance levels:
Resistance 1 (R1) = (2 x PP) – Low
Resistance 2 (R2) = PP + (High – Low)
Resistance 3 (R3) = High + 2 x (PP – Low)
Support levels:
Support 1 (S1) = (2 x PP) – High
Support 2 (S2) = PP – (High – Low)
Support 3 (S3) = Low – 2 x (High – PP)
How to forecast the daily central pivot point?
Forecasting the daily central pivot point is essential for traders because it helps them identify potential entry and exit points for their trades. There are several methods that traders use to forecast the daily central pivot point. We will discuss some of them below.
1. Historical data analysis:
One of the most common methods for forecasting the daily central pivot point is to analyze the historical data of the currency pair. Traders can use the high, low, and close prices of the previous trading days to calculate the central pivot point. Once they have calculated the central pivot point, they can use it to forecast the support and resistance levels for the current trading day.
2. Technical analysis:
Traders can also use technical analysis indicators to forecast the daily central pivot point. Technical analysis involves analyzing the charts and identifying patterns and trends in the market. Traders can use indicators such as moving averages, Bollinger Bands, and Fibonacci retracements to forecast the central pivot point.
3. News events:
News events can also impact the daily central pivot point. Traders should keep an eye on economic releases, political events, and other news that can affect the currency pair they are trading. For example, if there is a positive economic release, it can lead to an increase in the currency pair’s value, which can cause the central pivot point to move higher.
Conclusion:
The daily central pivot point is an essential tool for forex traders because it helps them identify potential entry and exit points for their trades. It is calculated by taking the average of the high, low, and close prices of the previous trading day. Traders can use historical data analysis, technical analysis, and news events to forecast the daily central pivot point. By using the daily central pivot point, traders can make informed trading decisions and increase their chances of success in the forex market.
