Posted by forex at 1:40 AM
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1. Open a price chart of any FOREX currency instrument that you wish to trade. Use any FOREX charting software to create this chart.
2. Identify the highest, lowest and closing prices of the previous day. These represent the pivot points for the current day. The closing price is the last traded price in the previous day.
3. Calculate an average of these three prices. Add the highest, lowest and closing prices of the previous day together and divide this result by 3. This average is the main pivot point from which all other pivot point levels are based.
4. Double this pivot number, and then subtract the previous day's lowest price. This is 'R1,' or the first resistance level above the pivot point. As with all resistance levels, prices could reverse at this price point as they approach it from either direction.
5. Calculate the full price range of the previous day. This is the highest price minus the lowest price. Add this result to the main pivot point. This is 'R2,' or the second resistance pivot point.
6. Subtract the previous day's lowest price from the main pivot point, then double this result. Add this result to the previous day's highest price. The final result is 'R3,' or the third resistance level.
7. Double the main pivot point and subtract the previous day's highest price. This is 'S1,' or the first support pivot point level. Like the resistance levels, the support levels may act as reversal points during the trading day.
8. Subtract the previous day's full price range from the main pivot point. This is 'S2.'
9. Subtract the main pivot point from the previous day's highest price and double this number. Subtract the result from the previous day's lowest price. The final result is 'S3.'