A pivot point is a significant price level often used by traders as a predictive indicator. Pivots are calculated based on previous high low and close data.
Pivots, or floor pivots as they were originally known, were created by futures traders at the Chicago and Mercantile Exchange (CME) as a means of predicting support and resistance levels in the market. Typically traders use Daily, Weekly and Monthly pivots and overlay them on their charts to see where the current price is in relationship to the pivot levels. It is also important to note there are important longer range and specialised pivot systems which FX AlgoTrader also supply for MetaTrader 4 which diligent technical traders should be aware of.
Pivot levels are effectively a grid of support and resistance levels. As the timeframe increases so does the importance of the level. Thus, Monthly pivot levels have more significance than Daily pivot levels. There are also intermediate levels called 'M' levels - these are on all the pivot timeframes ie Daily, Weekly and Monthly. Intermediate levels ('M' levels) are not as significant as the major levels.
Pivot levels offer high probability price reaction points. This is especially significant where there is a grouping or 'confluence' of pivot levels from different timeframes in a specific price range on the chart for the asset being traded. Well prepared traders are always looking for a confluence of technical levels as they know there is a much higher probability of strong price reaction around them. Major pivots level confluences will typically produce major price reaction points.
The FX AlgoTrader Pivot Scanner provides a fully automated way for traders to be automatically informed when price action comes within a specified range of pre-calculated pivot confluence level consisting of any combination of Daily, Weekly or Monthly pivot levels. The Pivot Scanner is provided as an Expert Advisor for MT4 - it is only necessary to run the system on a single chart - the chart timeframe is immaterial.
The Pivot Scanner offers a unique speech synthesised alert system where the trader is informed verbally when price action is within a specified range of a confluence level. Please see the features section for more details on the comprehensive array of tuning options available.