Pivots in Forex YouTube are an essential tool for traders, especially those who use technical analysis to make trading decisions. In this article, we will explore what pivots are, how they work, and how traders can use them to improve their trading strategies.
What are Pivots?
Pivots are technical indicators used in Forex trading to identify potential support and resistance levels. They are calculated using the previous day’s high, low, and closing prices. By plotting these values onto a chart, traders can identify key levels where the price may reverse or consolidate.
The pivot point is the central value that is calculated using the formula:
Pivot Point = (High + Low + Close) / 3
By using this central pivot point, traders can calculate three levels of support and resistance. These levels are called S1, S2, S3, R1, R2, and R3.
S1 = (2 x Pivot Point) – High
S2 = Pivot Point – (High – Low)
S3 = Low – 2(High – Pivot Point)
R1 = (2 x Pivot Point) – Low
R2 = Pivot Point + (High – Low)
R3 = High + 2(Pivot Point – Low)
How Pivots Work
Pivots are calculated daily and can be used by traders to identify potential areas of support and resistance. When the price of a currency pair reaches one of these levels, traders may expect the price to reverse or consolidate.
For example, if the price of a currency pair is approaching the R1 level, traders may expect the price to reverse and move lower. Conversely, if the price is approaching the S1 level, traders may expect the price to reverse and move higher.
Traders can also use the other levels of support and resistance to identify potential entry and exit points. For example, if the price of a currency pair is approaching the R2 level, traders may consider taking profits on their long positions or entering short positions.
Pivots can be used in conjunction with other technical indicators to create a more comprehensive trading strategy. For example, traders may use moving averages, trend lines, or Fibonacci retracements to confirm or contradict the signals provided by pivots.
How to Use Pivots in Forex Trading
There are several ways that traders can use pivots in their trading strategies. Here are some of the most common methods:
1. Pivot Point Breakout: Traders may enter a long or short position when the price of a currency pair breaks through the central pivot point. For example, if the price breaks through the pivot point from below, traders may enter a long position.
2. Pivot Point Reversal: Traders may enter a long or short position when the price of a currency pair reaches a key level of support or resistance. For example, if the price reaches the R1 level and begins to reverse, traders may enter a short position.
3. Pivot Point Bounce: Traders may enter a long or short position when the price of a currency pair bounces off a key level of support or resistance. For example, if the price reaches the S1 level and bounces higher, traders may enter a long position.
4. Pivot Point Retracement: Traders may use the levels of support and resistance provided by pivots to identify potential areas of retracement. For example, if the price of a currency pair is in an uptrend and reaches the R1 level, traders may expect the price to retrace to the central pivot point before continuing higher.
Conclusion
Pivots are a useful tool for traders who use technical analysis to make trading decisions. By identifying key levels of support and resistance, traders can improve their trading strategies and make more informed decisions.
However, it is important to remember that no trading strategy is foolproof. Traders must always be prepared for unexpected market movements and use risk management techniques to protect their capital.
