How calculate Pivot Point, Support and Resistance

How calculate Pivot Point, Support and Resistance

We often hear analyzer market or experienced traders talk about the market approached a certain price "support" or "resistance".

Well each level of the "support" or "resistance" is very important part,because this is the point at which movement a great price is expected to occur and changes in major and minor will changed direction.

But how the analysts and professional traders can identify the levels called?

The first thing you're going to learn is how to calculate pivot point levels.

The pivot point and associated support and resistance levels are calculated by using the last trading session's open, high, low, and close. Since Forex is a 24-hour market, most traders use the New York closing time of 4:00pm EST as the previous day's close.


Thinking How to Pivot Point work's
There are several different type to think about pivot points, the most common is 5 level.

Some system used the price by the previous day "High", "Low" and "Close", together with 2 levels of (support) and 2 levels of (resistance) on the day before we get a "pivot point".Calculation are calculated from previous day High , Low & Close.

The calculation as follows:
For ease of this calculation, you need to get a first pivot point value for support and resistance calculation.
The calculation for a pivot point is shown below:

Pivot point (PP) = (High + Low + Close) / 3

Support and resistance levels are then calculated off the pivot point like so:

First level support and resistance:
First resistance (R1) = (2 x PP) - Low
First support (S1) = (2 x PP) - High

Second level of support and resistance:
Second resistance (R2) = PP + (High - Low)
Second support (S2) = PP - (High - Low)

Third level of support and resistance:
Third resistance (R3) = High + 2(PP - Low)
Third support (S3) = Low - 2(High - PP)

Keep in mind that some charting software plot intermediate levels or mid-point levels. These are basically mini levels between the main pivot point and support and resistance levels.

If you hated algebra, have no fear because you don't have to perform these calculations yourself. Most charting software will automatically do this for you. Just make sure you configure your settings so that it uses the correct closing time and price.

The theory is..
If the opening price today (hypothetical pivot overnight) is higher than the pivot point, the price will be goes to "Resistance 1" ,if not otherwise it will going to "Support 1".

Well,if the price is below "Support 1" the price would "rebound" and continue to "Support 2", it's also vice verse for "Resistance 1".

If the opening price continues to be under "Support 2", there is the possibility to return back from  "Support  1" or to the Pivot Point, on the contrary also to the "Resistance 2"

Disclaimer Updated : 30 May 2023
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