Pivot Points are one of the many ways used by traders to determine Support and Resistance in price movements. Pivot Points are made based on the highest price, lowest price, and closing price in the previous period, to produce an estimate of Support and Resistance levels of future price movements.
As you know, forex trading requires reference levels, namely Support and Resistance which are used to determine when we should enter, as well as where we have to determine the Stop Loss and target levels. If you pay attention, the levels of Support and Resistance are very important to determine the amount of risk in trading. Without proper risk calculation, you will most likely be exposed to a Margin Call. Conversely, by determining the appropriate risk for each trade, then in the long run your trading results will tend to be profitable. One tool that actually helps in determining potential support and resistance reference levels is the Pivot Point.
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