The Forex trading strategy of using pivot points has been around for a long time and was originally used by floor traders. With only a few simple calculations floor traders would have some idea of where the Forex market was heading during the course of the day. The level at which the Forex market direction changes for the day is the pivot point. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points become critical support and resistance levels. The support and resistance levels calculated from the previous day are collectively together known as pivot levels. Every day the market you are following has an open, high, low and a close for the day. This information basically contains all the data you need to use pivot points. Pivot points in Forex trading are so popular because they are predictive as opposed to lagging. The information of the previous day is used to calculate potential turning points for the day you are about to trade. Many traders follow pivot points so Forex traders will often find that the market reacts at these levels. This gives an opportunity to trade.
