Floor trader pivots, also known as pivot points, are widely used in forex trading as a technical analysis tool to identify potential support and resistance levels for a particular trading day. These levels are calculated based on the previous day’s trading range and can help traders determine entry and exit points, as well as stop-loss and take-profit levels.
Calculating floor trader pivots requires a few simple steps, which we will outline in this article. By following these steps, you can quickly and easily calculate pivot points for any currency pair and use them in your trading strategy.
Step 1: Determine the High, Low, and Close of the Previous Trading Day
The first step in calculating floor trader pivots is to determine the high, low, and close of the previous trading day. This information can be found on most forex trading platforms, or you can use a forex charting tool to analyze historical data.
For example, let’s say that the high of the previous trading day was 1.2000, the low was 1.1800, and the close was 1.1900.
Step 2: Calculate the Pivot Point
The pivot point is the central level around which the other support and resistance levels are calculated. To calculate the pivot point, you need to add the high, low, and close of the previous trading day and divide by three.
The formula for calculating the pivot point is as follows:
Pivot Point = (High + Low + Close) / 3
Using the example above, we can calculate the pivot point as follows:
Pivot Point = (1.2000 + 1.1800 + 1.1900) / 3
Pivot Point = 1.1900
So, the pivot point for the current trading day is 1.1900.
Step 3: Calculate the First Support and Resistance Levels
Once you have calculated the pivot point, you can calculate the first support and resistance levels. These levels are based on the pivot point and the trading range of the previous day.
To calculate the first support level, you need to multiply the pivot point by two and subtract the high of the previous day.
The formula for calculating the first support level is as follows:
Support 1 = (2 x Pivot Point) – High
Using the example above, we can calculate the first support level as follows:
Support 1 = (2 x 1.1900) – 1.2000
Support 1 = 1.1800
So, the first support level for the current trading day is 1.1800.
To calculate the first resistance level, you need to multiply the pivot point by two and subtract the low of the previous day.
The formula for calculating the first resistance level is as follows:
Resistance 1 = (2 x Pivot Point) – Low
Using the example above, we can calculate the first resistance level as follows:
Resistance 1 = (2 x 1.1900) – 1.1800
Resistance 1 = 1.2000
So, the first resistance level for the current trading day is 1.2000.
Step 4: Calculate the Second Support and Resistance Levels
In addition to the first support and resistance levels, you can also calculate the second support and resistance levels. These levels are based on the first support and resistance levels and the trading range of the previous day.
To calculate the second support level, you need to subtract the trading range of the previous day from the first support level and add it to the first resistance level.
The formula for calculating the second support level is as follows:
Support 2 = First Support Level – (High – Low)
Using the example above, we can calculate the second support level as follows:
Support 2 = 1.1800 – (1.2000 – 1.1800)
Support 2 = 1.1600
So, the second support level for the current trading day is 1.1600.
To calculate the second resistance level, you need to add the trading range of the previous day to the first resistance level and subtract it from the first support level.
The formula for calculating the second resistance level is as follows:
Resistance 2 = First Resistance Level + (High – Low)
Using the example above, we can calculate the second resistance level as follows:
Resistance 2 = 1.2000 + (1.2000 – 1.1800)
Resistance 2 = 1.2200
So, the second resistance level for the current trading day is 1.2200.
Conclusion
Floor trader pivots are a popular technical analysis tool used by forex traders to identify potential support and resistance levels for a particular trading day. Calculating pivot points requires a few simple steps, which we have outlined in this article. By following these steps, you can quickly and easily calculate pivot points for any currency pair and use them in your trading strategy. Remember, pivot points are just one tool in your trading toolbox, and it’s essential to use them in conjunction with other technical and fundamental analysis tools to make informed trading decisions.
