Pivot Points
Originally developed by floor traders, pivot points calculate support and resistance levels from the previous period's price action—giving you objective levels to watch before the market opens.
What are Pivot Points?
Pivot points are a technical analysis indicator used to determine the overall market trend over different time frames. The pivot point itself is the average of the high, low, and close from the previous trading period.
Above the pivot point, the market is considered bullish. Below it, bearish. Additional support (S1, S2, S3) and resistance (R1, R2, R3) levels are calculated from this central pivot.
Above Pivot = Bullish
When price opens or trades above the pivot point, look for long opportunities toward R1, R2.
Below Pivot = Bearish
When price opens or trades below the pivot point, look for short opportunities toward S1, S2.
Pivot Point Formulas
The Standard (Floor Trader) pivot point method is the most widely used. It uses the previous period's high, low, and close to calculate seven key levels.
Pivot Point (PP)
PP = (High + Low + Close) / 3
Support Levels
S1 = (2 × PP) - High
S2 = PP - (High - Low)
S3 = Low - 2(High - PP)
Resistance Levels
R1 = (2 × PP) - Low
R2 = PP + (High - Low)
R3 = High + 2(PP - Low)
Trading Strategies
Pivot points work best in trending markets where price respects these mathematical levels. The key is to wait for price action confirmation.
Pivot Bounce Strategy
- Wait for price to approach the central pivot point
- Look for reversal candlestick patterns at the level
- Enter in the direction of the bounce
- Target the next pivot level (S1 or R1)
Pivot Breakout Strategy
- Price breaks through R1 or S1 with momentum
- Wait for a retest of the broken level
- Enter when support becomes resistance (or vice versa)
- Target R2/S2 or R3/S3
Types of Pivot Points
Besides Standard pivots, several variations exist. Each has unique characteristics suited for different trading styles.
Fibonacci Pivots
Uses Fibonacci ratios (38.2%, 61.8%) to calculate S/R levels. Popular for swing trading.
Camarilla Pivots
Creates tighter levels, ideal for scalping. Four support and four resistance levels.
Woodie Pivots
Gives more weight to the close price. Better for momentum traders.
DeMark Pivots
Uses the relationship between open and close. Different formula based on where close falls.
Best Practices
Pivot points are most effective when used correctly. Follow these guidelines to maximize their usefulness.
Timeframe Selection
- Daily pivots for intraday trading
- Weekly pivots for swing trading
- Monthly pivots for position trading
- Higher timeframe pivots are stronger
Confluence is Key
- Combine with VWAP for stronger levels
- Watch for pivots at round numbers
- Look for pivots near moving averages
- Multiple pivot types at same level = high probability
Important Note
Pivot points work best in liquid markets with clear trading sessions. They're most effective in forex (using New York close) and equities. 24/7 crypto markets may require anchored pivots from significant price events.
Frequently Asked Questions
What are pivot points?
Pivot points are support and resistance levels calculated from the prior period's high, low, and close (e.g. previous day or week). The central pivot and derived R1/R2/R3 (resistance) and S1/S2/S3 (support) are used for intraday or swing trading.
How do I calculate standard pivot points?
Pivot (P) = (High + Low + Close) / 3. R1 = 2P - Low, R2 = P + (High - Low), R3 = High + 2(P - Low). S1 = 2P - High, S2 = P - (High - Low), S3 = Low - 2(High - P). Use the prior period's H, L, C for the timeframe you trade.
What timeframe should I use for pivot points?
Daily pivots are common for intraday trading; weekly pivots for swing trading; monthly for position trading. Higher-timeframe pivots tend to be stronger. Match the pivot period to your holding period.
What are Fibonacci pivot points?
Fibonacci pivots use Fibonacci ratios (e.g. 0.382, 0.618) to place R1, R2, S1, S2 relative to the range (High - Low). They can differ from standard pivots and are preferred by some traders who use Fibonacci in their strategy.
Do pivot points work in all markets?
They work best in liquid markets with clear sessions (e.g. forex with NY close, equities). In 24/7 markets like crypto, standard daily pivots may be less meaningful; anchored pivots from significant events or session opens can be used instead.