Pivot Points

Pivot points are support and resistance levels calculated from the previous period's high, low and close. Floor traders in futures pits used them for decades as a quick way to know where price might react during the day. Because they are calculated the same way by thousands of traders and platforms, they often become self fulfilling reference points, especially for intraday trading.

The classic formula#

Pivot (P) = (High + Low + Close) ÷ 3
R1 = 2P − Low          S1 = 2P − High
R2 = P + (High − Low)  S2 = P − (High − Low)
R3 = High + 2 × (P − Low)   S3 = Low − 2 × (High − P)

Daily pivots use the previous day's high, low and close. Weekly and monthly pivots use the previous week's or month's values and are watched by swing traders.

Types of pivot points#

Most traders stick to classic pivots, because they are the most widely watched.

How traders use pivot points#

Bias#

Price trading above the pivot suggests a bullish bias for the session; below suggests bearish. Many day traders favour long trades above the pivot and short trades below it.

Reaction levels#

R1, R2, S1 and S2 are watched for bounces or breaks. A rejection at R1 with a bearish candle can be a short entry targeting the pivot. A clean break and hold above R1 can target R2.

Targets and stops#

Pivots provide ready made, objective targets and stop levels, which helps intraday traders plan quickly.

Confluence#

Pivots are strongest when they line up with other levels: previous day highs and lows, round numbers or moving averages. See Level Strength and Clustering and Previous Highs and Lows.

Which markets and timeframes#

Pivot points are most popular in liquid futures, major forex pairs and large stocks for intraday trading. In 24 hour markets, traders must choose a session definition for the "daily" high, low and close; forex traders often use the New York 5:00 p.m. close. Crypto traders often use midnight UTC. Different choices produce different levels.

Limitations#

• Static: levels do not change during the period, even after major news.
• Not universal: different session definitions create different pivots.
• Overload: plotting R1 to R3, S1 to S3 and midpoints can clutter the chart so that price is always near a level.

A pivot point routine for day traders#

Before the session, calculate or load the day's pivots and mark which ones line up with other levels, such as the previous day's high and low. Note where price opens relative to the main pivot. During the session, focus only on reactions at the levels with confluence, and use the next pivot level as the first target.

Common mistakes#

• Trading every pivot touch without confirmation from price action.
• Ignoring trend days, when price can blow through several levels.
• Using pivots from a different session definition than the market you trade.

Frequently asked questions#

How are pivot points calculated?#

The classic pivot is the average of the previous period's high, low and close. Support and resistance levels are derived from the pivot and the previous range.

What timeframe are pivot points best for?#

Daily pivots are popular for intraday trading; weekly and monthly pivots suit swing and position traders.

Do pivot points really work?#

They are widely watched, which can make them act as reference points, but they should be combined with price action and other levels rather than traded blindly.

Sources#

• Wikipedia, Pivot point (technical analysis)