## Secret Pivot Level They Don’t Want You to Know About

Not only this, and it is rather revolting, pick up a book on Forex; especially the one teaching you the “basics.” You will be hard pressed to find this secret price level that the pros use…

…and now you

The issue has risen of late by the Swiss over improper pricing around the 1600 GMT – London Time and covered by the major news sources like Reuters.

Reuters 2 - UPDATE 2-Switzerland probes banks over possible forex rigging

Why? Because apparently that is the time the closing time for the Daily benchmark rates used by the institutions and corporations. From the article:

The key foreign exchange benchmark rates, WM/Reuters, are calculated using actual trades hourly through most of the trading day, with closing rates “fixed” at 4 p.m. in London.

Many banks provide a service to their customers where they guarantee to trade at the WM/Reuters rates. It is useful for buyside investors like large funds to value and benchmark their portfolios because most main stock and bond index compilers use these rates for their calculations.

Corporates also use the WM/Reuters rates to value currency holdings worldwide at a uniform rate. Auditors accept the WM/Reuters rates as independently fixed.

So, follow the money. If this price is important to major players in the financial world, it should be notated on a notepad or on your charting software.

I attached a EUR/JPY chart where the closing price has been resistance since the reversal and sell-off we encountered earlier day.

With the most important pivot level known.

To reach Eric, the reporter for this article, contact him through this link: http://www.vcita.com/v/caesartrade/contact

Or sign up for his daily emails that seem to get better with age: http://forms.aweber.com/form/89/177508589.htm

…and now you

The issue has risen of late by the Swiss over improper pricing around the 1600 GMT – London Time and covered by the major news sources like Reuters.

**Reuters 1 -**Switzerland probes banks over possible forex riggingReuters 2 - UPDATE 2-Switzerland probes banks over possible forex rigging

Why? Because apparently that is the time the closing time for the Daily benchmark rates used by the institutions and corporations. From the article:

The key foreign exchange benchmark rates, WM/Reuters, are calculated using actual trades hourly through most of the trading day, with closing rates “fixed” at 4 p.m. in London.

Many banks provide a service to their customers where they guarantee to trade at the WM/Reuters rates. It is useful for buyside investors like large funds to value and benchmark their portfolios because most main stock and bond index compilers use these rates for their calculations.

Corporates also use the WM/Reuters rates to value currency holdings worldwide at a uniform rate. Auditors accept the WM/Reuters rates as independently fixed.

So, follow the money. If this price is important to major players in the financial world, it should be notated on a notepad or on your charting software.

I attached a EUR/JPY chart where the closing price has been resistance since the reversal and sell-off we encountered earlier day.

With the most important pivot level known.

To reach Eric, the reporter for this article, contact him through this link: http://www.vcita.com/v/caesartrade/contact

Or sign up for his daily emails that seem to get better with age: http://forms.aweber.com/form/89/177508589.htm

Pivot Points

Pivot points have been used in technical analysis for quite some time and were originally used by

In today's computerized age, a pivot point calculator can be used to quickly indicate up to seven pivot levels – three

Calculating Pivot PointsCalculating pivot points is fairly easy; all you need is the high, low, and close price for the previous period. However, there are a number of different formulae or methods that can be used to calculate the pivot points. The most widely used method is called the

The three common methods for calculating pivot points are:

Classic Floor Traders Pivot PointsClassic pivot points are the most commonly used pivot points and rely on the high, low and close of the previous period to calculate the main pivot point using the formula:

( previous high + previous low + previous close ) / 3

The other levels are then calculated based on the main pivot point, the previous period's high, previous period's low, and the previous period's range (i.e., high - low).

Woodies Pivot PointsWoodies pivot points are similar to the classic pivot points with the exception that Woodies ignores the close price of the previous period and gives greater significance to the open price of the current period. Thus, the formula used to calculate the main pivot point using the Woodies pivot method is:

( previous high + previous low + ( 2 x current open ) ) / 4

The other resistance and support pivot levels are calculated the same as in the classic floor traders pivot method.

Camarilla Pivot PointsThe Camarilla pivot point method was developed in 1989 by a successful bond trader named

( previous high + previous low + previous close ) / 3

However, the other levels are calculated using the close price and the range ( high - low ) for the previous period. Of these other levels, the most significant levels are the R3 and R4 levels, as well as the S3 and S4 levels.

Fibonacci Pivot PointsThe same classic formula is used to calculate the main pivot point for the Fibonacci method but then the key Fibonacci retracement levels of the previous period's range are used to determine the various support and resistance levels. The key Fibonacci retracement levels being the 100%, 61.8%, 50%, and 38.2% levels.

DeMark Pivot PointsDeMark Pivot Points were developed by

X / 2 - previous low and X / 2 + previous high

for R1 and S1 respectively.

If the previous period's close is higher than the open that is the previous period closed up on the open then X is calculated using the formula:

( 2 x previous high ) + previous low + previous close

If the previous period's close is lower than the open that is the previous period closed down on the open then X is calculated using the formula:

previous high + ( 2 x previous low ) + previous close

Finally, if the previous period's close is at the same level as it's open then X is calculated using the formula:

previous high + previous low + ( 2 x previous close )

Some traders calculate the main pivot using the formula X / 4, but this is not an "official" DeMark level.

Using Pivot PointsThe general idea behind trading with pivot points is to look for a reversal or break of the R1 or S1 levels depending on where the market opens.

As mentioned earlier, should the market open above PP, it is considered bullish and you should watch the R1 level for a potential long entry. Ideally, you would expect the market to stall slightly at R1 before moving up to R2, at which point the market should be overbought already and may be a potential exit point. However, should the market have enough momentum, it could break R2 and move on towards R3.

Should the market open above R1 then R2 would be the potential entry and R3 would be the potential exit.

Should the market open below PP, it is considered bearish and you should watch the S1 level for a potential short entry. Ideally, you would expect the market to stall slightly at S1 before moving down to S2, at which point the market should be oversold, making S2 a potential exit point. However, should the market have enough momentum, it could break S2 and move on towards S3.

Should the market open below S1 then S2 would be the potential entry and S3 would be the potential exit.

Pivot points have been used in technical analysis for quite some time and were originally used by

**floor traders**who traded for their own accounts on the floor of the stock or commodities exchange. Pivot points represented an easy way for floor traders to have an idea of where the market was heading during the course of the day after performing only a few simple calculations on the close, high and low price of the previous day, and, in some cases, the open of the current day. Pivot points can be used as a predictive indicator to indentify key support and resistance levels, which are called pivot levels, and can be used to forecast the short-term direction that the market will take during the course of the day.In today's computerized age, a pivot point calculator can be used to quickly indicate up to seven pivot levels – three

**resistance levels**named R1 (first resistance level), R2 (second resistance level) and R3 (third resistance level); the main pivot point (PP); and three**support levels**named S1 (first support level), S2 (second support level) and S3 (third support level), with S1, PP and R1 being considered the three main pivot levels. Pivot points can also be used to quickly determine market direction with the market considered bullish when it opens above PP, and bearish when it opens below PP.Calculating Pivot PointsCalculating pivot points is fairly easy; all you need is the high, low, and close price for the previous period. However, there are a number of different formulae or methods that can be used to calculate the pivot points. The most widely used method is called the

**classic floor traders' method**, which uses the average of the high, low and closing price for the previous period. Other calculation methods also take into account the open price for the previous period or the opening price for the current period.The three common methods for calculating pivot points are:

- The classic or floor traders' method
- The Woodie method, which makes use of the current open price
- The Camarilla method

Classic Floor Traders Pivot PointsClassic pivot points are the most commonly used pivot points and rely on the high, low and close of the previous period to calculate the main pivot point using the formula:

( previous high + previous low + previous close ) / 3

The other levels are then calculated based on the main pivot point, the previous period's high, previous period's low, and the previous period's range (i.e., high - low).

Woodies Pivot PointsWoodies pivot points are similar to the classic pivot points with the exception that Woodies ignores the close price of the previous period and gives greater significance to the open price of the current period. Thus, the formula used to calculate the main pivot point using the Woodies pivot method is:

( previous high + previous low + ( 2 x current open ) ) / 4

The other resistance and support pivot levels are calculated the same as in the classic floor traders pivot method.

Camarilla Pivot PointsThe Camarilla pivot point method was developed in 1989 by a successful bond trader named

**Nick Stott**. Like the classic pivot points method, the Camarilla method also uses the average of the previous day's high, low and close price to calculate the main pivot. That is:( previous high + previous low + previous close ) / 3

However, the other levels are calculated using the close price and the range ( high - low ) for the previous period. Of these other levels, the most significant levels are the R3 and R4 levels, as well as the S3 and S4 levels.

Fibonacci Pivot PointsThe same classic formula is used to calculate the main pivot point for the Fibonacci method but then the key Fibonacci retracement levels of the previous period's range are used to determine the various support and resistance levels. The key Fibonacci retracement levels being the 100%, 61.8%, 50%, and 38.2% levels.

DeMark Pivot PointsDeMark Pivot Points were developed by

**Tom DeMark**and are entirely different compared to other pivot points. For DeMark pivot points, the main pivot point is not significant. Only the R1 and S1 pivot levels are significant. However, the calculation for R1 and S1 differs depending on whether the previous period's close was higher, lower or equal to the previous period's open. If the close was higher, then the high is given more weight; if the close was lower, then the low is given more weight; and if the close is the same as the open, then the close is given more weight. For each of these conditions, the X is calculated and R1 and S1 are determined by using the formula:X / 2 - previous low and X / 2 + previous high

for R1 and S1 respectively.

If the previous period's close is higher than the open that is the previous period closed up on the open then X is calculated using the formula:

( 2 x previous high ) + previous low + previous close

If the previous period's close is lower than the open that is the previous period closed down on the open then X is calculated using the formula:

previous high + ( 2 x previous low ) + previous close

Finally, if the previous period's close is at the same level as it's open then X is calculated using the formula:

previous high + previous low + ( 2 x previous close )

Some traders calculate the main pivot using the formula X / 4, but this is not an "official" DeMark level.

Using Pivot PointsThe general idea behind trading with pivot points is to look for a reversal or break of the R1 or S1 levels depending on where the market opens.

As mentioned earlier, should the market open above PP, it is considered bullish and you should watch the R1 level for a potential long entry. Ideally, you would expect the market to stall slightly at R1 before moving up to R2, at which point the market should be overbought already and may be a potential exit point. However, should the market have enough momentum, it could break R2 and move on towards R3.

Should the market open above R1 then R2 would be the potential entry and R3 would be the potential exit.

Should the market open below PP, it is considered bearish and you should watch the S1 level for a potential short entry. Ideally, you would expect the market to stall slightly at S1 before moving down to S2, at which point the market should be oversold, making S2 a potential exit point. However, should the market have enough momentum, it could break S2 and move on towards S3.

Should the market open below S1 then S2 would be the potential entry and S3 would be the potential exit.

Pivot Point Calculator

Pivot points are predictive indicators that were first used by floor traders. They are used to identify key support and resistance levels that can be used to forecast the direction of the market based on where the market opens in relation to the price data from the previous period. The three key levels are R1, S1 and PP, although most traders also calculate the R2, R3, S2 and S3 levels. Our online Pivot Point Calculator goes one step further by calculating resistance levels up to R4 and support levels up to S4.

The following Pivot Point Calculator can be used to calculate the various pivot points for your live chart regardless of whether you trade forex, futures, bonds, commodities, stocks, options or any other financial instrument as long as you have the previous period's open, high, low and close price. You can also select the type of pivot points you want to use by selecting the pivot point formula that you want to use. The available pivot point formulae include the Classic Pivot Points, Woodie Pivot Points, Camarilla Pivot Points, Fibonacci Pivot Points and DeMark Pivot Points.

Formula:R4 = H + 3 x (PP - L)

R3 = H + 2 x (PP - L)

R2 = PP + (R1 - S1)

R1 = (2 x PP) - L

PP = (H + L + C) / 3

S1 = (2 x PP) - H

S2 = PP - (R1 - S1)

S3 = L - 2 x (H - PP)

S4 = L - 3 x (H - PP)

Pivot points are predictive indicators that were first used by floor traders. They are used to identify key support and resistance levels that can be used to forecast the direction of the market based on where the market opens in relation to the price data from the previous period. The three key levels are R1, S1 and PP, although most traders also calculate the R2, R3, S2 and S3 levels. Our online Pivot Point Calculator goes one step further by calculating resistance levels up to R4 and support levels up to S4.

The following Pivot Point Calculator can be used to calculate the various pivot points for your live chart regardless of whether you trade forex, futures, bonds, commodities, stocks, options or any other financial instrument as long as you have the previous period's open, high, low and close price. You can also select the type of pivot points you want to use by selecting the pivot point formula that you want to use. The available pivot point formulae include the Classic Pivot Points, Woodie Pivot Points, Camarilla Pivot Points, Fibonacci Pivot Points and DeMark Pivot Points.

- For
**Classic Pivot Points**,**Camarilla Pivot Points**and**Fibonacci Pivot Points**you must have the previous period's high, low and close prices. - For
**Woodie Pivot Points**you must have the previous period's high and low prices, as well as the open price for the current period. - For
**DeMark Pivot points**you must have the previous period's open, high, low and close prices.

Formula:R4 = H + 3 x (PP - L)

R3 = H + 2 x (PP - L)

R2 = PP + (R1 - S1)

R1 = (2 x PP) - L

PP = (H + L + C) / 3

S1 = (2 x PP) - H

S2 = PP - (R1 - S1)

S3 = L - 2 x (H - PP)

S4 = L - 3 x (H - PP)

//The old pit pivots formula... Expanded.
PivotPoint = (High + Low + Close) / 3; R1 = (2 * PivotPoint) - Low; S1 = (2 * PivotPoint) - High; R2 = PivotPoint + (R1 - S1); S2 = PivotPoint - (R1 - S1); R3 = 2 * (PivotPoint - Low) + High; S3 = Low - 2 * (High - PivotPoint); R4 = 3 * (PivotPoint - Low) + High; S4 = Low - 3 * (High - PivotPoint); R5 = 4 * (PivotPoint - Low) + High; S5 = Low - 4 * (High - PivotPoint); S_5 = (S1 + PivotPoint) / 2; R_5 = (R1 + PivotPoint) / 2; R1_5 = (R2 + R1) / 2; S1_5 = (S2 + S1) / 2; R2_5 = (R3 + R2) / 2; S2_5 = (S3 + S2) / 2; R3_5 = (R3 + R4) / 2; S3_5 = (S3 + S4) / 2; R4_5 = (R4 + R5) / 2; S4_5 = (S4 + S5) / 2; |
case TRADITIONAL:
pivot = (high + low + close) / 3.0; pivotPoint.p = pivot; pivotPoint.r1 = pivot * 2 - low; pivotPoint.s1 = pivot * 2 - high; pivotPoint.r2 = pivot + (high - low); pivotPoint.s2 = pivot - (high - low); pivotPoint.r3 = pivot * 2 + (high - 2 * low); pivotPoint.s3 = pivot * 2 - (2 * high - low); pivotPoint.r4 = pivot * 3 + (high - 3 * low); pivotPoint.s4 = pivot * 3 - (3 * high - low); pivotPoint.r5 = pivot * 4 + (high - 4 * low); pivotPoint.s5 = pivot * 4 - (4 * high - low); break; case FIBONACCI: pivot = (high + low + close) / 3.0; pivotPoint.p = pivot; pivotPoint.r1 = pivot + 0.382 * range; pivotPoint.s1 = pivot - 0.382 * range; pivotPoint.r2 = pivot + 0.618 * range; pivotPoint.s2 = pivot - 0.618 * range; pivotPoint.r3 = pivot + range; pivotPoint.s3 = pivot - range; break; case WOODIE: pivot = (high + low + 2 * open) / 4.0; pivotPoint.p = pivot; pivotPoint.r1 = 2 * pivot - low; pivotPoint.s1 = 2 * pivot - high; pivotPoint.r2 = pivot + range; pivotPoint.s2 = pivot - range; pivotPoint.r3 = high + 2 * (pivot - low); pivotPoint.s3 = low - 2 * (high - pivot); pivotPoint.r4 = pivotPoint.r3 + range; pivotPoint.s4 = pivotPoint.s3 - range; break; case CLASSIC: pivot = (high + low + close) / 3.0; pivotPoint.p = pivot; pivotPoint.r1 = 2 * pivot - low; pivotPoint.s1 = 2 * pivot - high; pivotPoint.r2 = pivot + range; pivotPoint.s2 = pivot - range; pivotPoint.r3 = pivot + 2 * range; pivotPoint.s3 = pivot - 2 * range; pivotPoint.r4 = pivot + 3 * range; pivotPoint.s4 = pivot - 3 * range; break; case DEMARK: final double x; if (Calc.isEqual(open, close)) { x = (high + low + 2 * close); } else if (Calc.isGreater(close, open)) { x = 2 * high + low + close; } else { x = 2* low + high + close; } pivot = x / 4.0; pivotPoint.p = pivot; pivotPoint.r1 = x / 2.0 - low; pivotPoint.s1 = x / 2.0 - high; break; case CAMARILLA: pivot = (high + low + close) / 3.0; pivotPoint.p = pivot; pivotPoint.r1 = close + range * 1.1 / 12.0; pivotPoint.s1 = close - range * 1.1 / 12.0; pivotPoint.r2 = close + range * 1.1 / 6.0; pivotPoint.s2 = close - range * 1.1 / 6.0; pivotPoint.r3 = close + range * 1.1 / 4.0; pivotPoint.s3 = close - range * 1.1 / 4.0; pivotPoint.r4 = close + range * 1.1 / 2.0; pivotPoint.s4 = close - range * 1.1 / 2.0; break; |