Forex traders use various technical analysis tools and indicators to identify the market trends and make trading decisions. One of the most popular indicators is the pivot point, which helps traders determine the key levels of support and resistance. Pivot points are calculated using mathematical formulas that take into account the previous day’s high, low, and close prices. There are different types of pivot points, including the standard pivot point, the Fibonacci pivot point, and the mid pivot point. In this article, we will discuss the mid pivot point and how to get it on forex.
What is the Mid Pivot Point?
The mid pivot point is a type of pivot point that is calculated by taking the average of the high, low, and close prices of the previous day. It is also known as the midpoint pivot point or the average pivot point. Unlike the standard pivot point and Fibonacci pivot point, which use specific mathematical formulas to calculate the levels of support and resistance, the mid pivot point is a simple average of the previous day’s price action.
Why Use the Mid Pivot Point?
The mid pivot point can be used as an alternative to the standard pivot point and Fibonacci pivot point. It is particularly useful for traders who prefer a more straightforward approach to technical analysis. The mid pivot point is also less sensitive to price fluctuations compared to the other types of pivot points, which means that it may provide more reliable levels of support and resistance.
How to Calculate the Mid Pivot Point?
To calculate the mid pivot point, you need to take the average of the previous day’s high, low, and close prices. Here’s the formula:
Mid Pivot Point = (Previous Day High + Previous Day Low + Previous Day Close) / 3
Once you have calculated the mid pivot point, you can then use it to determine the levels of support and resistance. Here’s how:
– First, calculate the first level of support and resistance by subtracting and adding the previous day’s range (high – low) to the mid pivot point, respectively. This gives you the S1 and R1 levels.
S1 = (2 x Mid Pivot Point) – Previous Day High
R1 = (2 x Mid Pivot Point) – Previous Day Low
– Next, calculate the second level of support and resistance by subtracting and adding the previous day’s range to the first level of support and resistance, respectively. This gives you the S2 and R2 levels.
S2 = Mid Pivot Point – (Previous Day High – Previous Day Low)
R2 = Mid Pivot Point + (Previous Day High – Previous Day Low)
– Finally, calculate the third level of support and resistance by subtracting and adding the previous day’s range to the second level of support and resistance, respectively. This gives you the S3 and R3 levels.
S3 = Previous Day Low – 2 x (Previous Day High – Mid Pivot Point)
R3 = Previous Day High + 2 x (Mid Pivot Point – Previous Day Low)
How to Use the Mid Pivot Point in Forex Trading?
The mid pivot point can be used in various ways in forex trading. Here are some common ways to use it:
– Levels of support and resistance: The mid pivot point can be used to identify the levels of support and resistance. Traders can use these levels to enter and exit trades, set stop-loss and take-profit levels, and manage their risk.
– Trend identification: The mid pivot point can be used to identify the trend direction. If the price is trading above the mid pivot point, it is considered bullish, and if it is trading below the mid pivot point, it is considered bearish.
– Breakout trading: Traders can use the mid pivot point to identify breakout trading opportunities. If the price breaks above the R1 level or below the S1 level, it is considered a breakout, and traders can enter a trade in the direction of the breakout.
Conclusion
The mid pivot point is a simple yet effective tool for forex traders to identify the levels of support and resistance. It is less sensitive to price fluctuations compared to the other types of pivot points, which means that it may provide more reliable levels of support and resistance. Traders can use the mid pivot point to enter and exit trades, set stop-loss and take-profit levels, and manage their risk. It can also be used to identify the trend direction and breakout trading opportunities.
