A pivot point is a Forex indicator. Emphasis is made on the price movement (i.e. low, high, and close) of previous trading days or earlier points within the current trading day. Simply put, if a specific, usually current market trades is above the pivot point vis a vis previous markets, then the same is bullish. If the market closes below, then the pivot point is bearish. At the onset, it is evident that a pivot point is a significant tool in Forex. As such, pivot calculators are being sold left and right. However, like every other product or service, not every calculator is made equal. The goal of this article is to discuss the basics of the same in order to provide traders with information that is relevant in choosing the right calculator
What is a Pivot Calculator?
A pivot calculator is software that can be used via the internet, a local network, or uploaded into an electronic device. Information relevant to support and resistance levels are inputted. The calculator then determines whether or not the market is conducive for a breakout or is still within a trend.
Why Use a Pivot Calculator?
A pivot calculator allows a trader to input raw data and then come up with a result relevant to pinpointing resistance and support levels. This in turn allows the trader to react as soon as a breakout becomes evident or to stay put when all indication points to the continuance of the status quo. At the very least, a trader can mark important points for future reference. This can be done with different currency pairs.
How to Select a Pivot Calculator?
First and foremost you need to select a pivot calculator provider. You can ask fellow traders or recognized mentors for a referral or you can browse through the internet and select from dozens, if not hundreds of providers. Second, for best results, opt for a calculator that provides demo accounts or trial periods. Third, read the manual. Pivot calculators are simple and straightforward. However, this does not mean that you should just wing it. This is because by doing so, you risk making a rookie mistake that can cost you a lot of money. Maximize the use of the demo account before trading on the floor.
How to Use a Pivot Calculator?
Different calculators have different user interfaces. However, as a general rule, every calculator requires you to:
- Define the time period from which to calculate the pivot point
- Input the highest amount for the time period in step 1 on the box or space designated as “high”.
- Input the lowest amount for the time period in step 1 on the box or space designated as “low”.
- Input the closing price for the time period in step 1 on the box or space designated as “close”.
- Click the calculate box or any box with words of similar import.
Remember, a calculator is only a tool to help you analyze raw data. It cannot help you determine what indicators to use as a reference for your trade strategy. More importantly it cannot help you predict a breakout 100% of the time.