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Pivot points origin in trade wells. Floor traders could make some simple calculations before the opening of markets and to arm the market likely support and resistance points during the trading day.

The pivot point calculator uses 3 entries - the previous days high, low and close. From this point are calculated in the pivot, 3 areas that could support and 3 areas which could be resistance. The pivot represents the midpoint of the market - above and the market is bullish, below and is seen as declining.

Pivot points are extremely popular even today on the markets traded electronically. Because many traders are watching these markets often react to these levels. In fact, some systems available in commerce and Web sites use nothing more points pivot to form buy and sell signals.

So, how are these levels calculated? Well here is the magic formula:

Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

There are a number of ways to use the pivot points that have been calculated:

Breakouts.
Simply, we use R1 as a buy signal and S1 as a sell signal. R2/S2 and R3/S3 can then be used as targets. For example, when the market opens we would place a buy stop at R1 and a sell stop at S1. Say, our buy stop is triggered, we then have a natural stop at S1 already in the market. We could then place a limit to sell 1/2 our order at R2 and another limit to sell the other half at R3. If R2 is hit then we could raise our stop to the pivot point or even R1.

Reversals.
We could use R1 as a sell signal or S1 as a buy signal, with stops at R2 and S2. Equally we could use R2/S2 as sell/buy signals with stops at R3/S3.

Combinations.
We can combine a breakout system with a reversal system. So, we buy a break of R1, with a stop at S1 and a target/reverse at R2. If R2 is reached we then sell with a stop at R3 and a target of the pivot point.

As can be seen, there are a lot of different ways that these levels can be used.

**Attachment
1. Close your Metatrader 4.
2. Copy & Paste Pivot_v3.ex4 to your Metatrader 4 indicator Installation folder. (C:\Program Files\\experts\indicators\)
3. Run your Metatrader 4 once again.
4. Search Pivot_v3 in your Custom Indicator Navigation(press [Ctrl]+[n] to show Navigation menu).
5. And then drag and drop to any chart, any TimeFrame.
6. Press [Ok] and done.