DEFINITION of 'Forex Pivot Points'

A forex pivot point is an indicator developed by floor traders in the commodities markets to determine potential turning points, also known as "pivots." Forex pivot points are calculated to determine levels in which the sentiment of the market could change from "bullish" to "bearish." Currency traders see pivot points as markers of support and resistance.

Day traders will use pivot points as a way to determine when market sentiment has gone from bullish to bearish or vice versa. 

BREAKING DOWN 'Forex Pivot Points'

Because pivot points are thought to work well in very liquid markets, the spot forex market may be the perfect place to use them. Day traders use the calculated pivot points to determine levels of entry, stops and profit taking by trying to determine where the majority of other traders may be doing the same. Forex pivot point calculators are available free of charge across the internet through retail forex brokers and third-party websites.

Pivot points can be points that correspond to trend lines, Fibonacci levels, moving averages, previous highs/lows or closes and many more indicators, depending on the trader's philosophy. 

While pivot points can pertain to different levels, some are derived from basic formula using highs, lows, and previous closes using the following formula

        Forex Pivot Point = (High + Low + Close) / 3

For more information on pivot points in trading see: Using Pivot Points In Forex Trading

 

 

RELATED TERMS
  1. Pivot Point

    A pivot point is a technical analysis indicator used to determine ...
  2. Forex Training

    Forex training is a guide for retail forex traders, offering ...
  3. Fulcrum Point

    Fulcrum point refers to a major change in direction for a security ...
  4. Forex Futures

    Forex futures are contracts which fluctuate as the underlying ...
  5. Forex Analysis

    Forex analysis describes the tools that traders use to determine ...
  6. Forex Options Trading

    Forex options trading allows currency traders to realize gains ...
Related Articles
  1. Trading

    Price Pivots Circle Big Profits

    Reading pivots will help you spot trends and use them to your advantage.
  2. Trading

    Using Pivot Points for Predictions

    Pivot points were originally developed by floor traders in the equity and commodity exchanges. Learn one of the most common methods of finding support and resistance levels.
  3. Trading

    The Pros & Cons Of A Forex Trading Career

    Trading foreign currencies can be lucrative, but there are many risks. Investopedia explores the pros and cons of forex trading as a career choice.
  4. Trading

    Forex Broker Guide

    A Guide To Choosing a Forex Broker
  5. Trading

    Stocks Plummet Amid Fears of a Trade War

    The major U.S. indexes declined sharply this week in response to plans to impose tariffs on steel and aluminum imports.
  6. Trading

    Can Forex Trading Make You Rich?

    Forex trading may be profitable for hedge funds or unusually skilled currency traders, but for average retail traders, forex trading can lead to huge losses.
RELATED FAQS
  1. Is it possible to trade forex options?

    Yes. Options are available for trading in almost every type of investment that trades in a market. Most investors are familiar ... Read Answer >>
  2. How do I use an arbitrage strategy in forex trading?

    See how forex arbitrage acts upon opportunities presented by pricing inefficiencies through the buying and selling of different ... Read Answer >>
  3. What is the best method of analysis for forex trading?

    Learn more about the types of forex analysis used by currency traders such as charting tools, economic indicators and/or ... Read Answer >>
  4. How does the foreign exchange market trade 24 hours a day?

    Because foreign currencies are in high demand, the forex market is open 24 hours a day, and trading is not done at one central ... Read Answer >>
  5. Where is the central location of the forex market?

    There is no central location of the foreign exchange market, often referred to as the forex (FX) market. Transactions in ... Read Answer >>
Trading Center