Pivot Points are support and resistance levels that are calculated using the open, high, low, and close, from the previous trading day. Standard pivot points include the pivot point itself, three full support levels, and three full resistance levels, but two half way support levels, and two half way resistance levels are also often included. Daily pivot points are the most commonly used, but weekly and monthly pivot points are also available. Pivot points are displayed on charts with the price bars, and are the horizontal lines in the chart shown above.
- Description: Pivot points are various calculations, made using the open, high, low, and close, from the previous trading day (Y).
PP = (YHigh + YLow + YClose) / 3
S1 = (PP * 2) - YHigh
S2 = PP - (YHigh - YLow)
S3 = (2 * PP) - ((2 * YHigh) - YLow)
R1 = (PP * 2) - YLow
R2 = PP + (YHigh - YLow)
R3 = (2 * PP) + (YHigh - (2 * YLow))
Pivot points are used as support and resistance levels, and as areas where significant price movement should be expected (such as reversals, or breakouts). There are several trading systems that use pivot points, so there are several different uses of pivot points, but in general they are used as support and resistance levels.