Pivot points (PP) help determine areas where the direction of price movement may change.
How are pivot points calculated?
Pivot point = (previous high + previous low + previous close) / 3
When the price is above PP, it may keep rising until it hits resistance. If it’s below PP, it may keep sliding until it hits support.
Where are the support and resistance levels?
Support 1 = (PP x 2) – previous high
Support 2 = PP – (previous high – previous low)
These levels are below the main PP line. They may support the price and initiate an upwards trend.
Resistance 1 = (PP x 2) – previous low
Resistance 2 = PP + (previous high – previous low)
These levels are above the main PP line. They may limit the price increase and initiate a downwards trend.
How to use pivot points
Once the price bounces off or breaches a level, the next level will be the target. PP can be effective on short-term timeframes, like M15.
The pivot points indicator is available on Olymp Trade
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