The Pivot in FOREX

The pivot point is the level at which the market direction changes for the day.
Using some simple arithmetic and the previous days high, low and close, a series of points are derived.
These points can be critical support and resistance levels.
The reason pivot point trading is so popular is that pivot points are PREDICTIVE as opposed to LAGGING indicator.
You use the information of the previous day to calculate potential turning points for the day you are about to trade (present day).
The general idea behind trading pivot points is to look for a reversal or break of R1 or S1.
By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.

Formula for Pivot:

Resistance 3 (R3)= High + 2*(Pivot - Low)
Resistance 2 (R2)= Pivot + (R1 - S1)
Resistance 1 (R1)= 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 (S1)= 2 * Pivot - High
Support 2 (S2)= Pivot - (R1 - S1)
Support 3 (S3)= Low - 2*(High - Pivot)