Definition
Pivot points calculate potential support/resistance levels using the previous period's high, low, and close. The main pivot (P) is the average of these prices. Support (S1, S2, S3) and resistance (R1, R2, R3) levels are derived from P.
Formula
Pivot = (High + Low + Close) / 3 | R1 = 2×Pivot - Low | S1 = 2×Pivot - High
Example
If yesterday's H=$52, L=$48, C=$50, Pivot = $50. R1 = $52, S1 = $48. Day traders watch these levels for potential bounces or breakouts.
FAQ
What is Pivot Points?
Calculated support and resistance levels based on previous period's prices.
How do you calculate Pivot Points?
A common formula for Pivot Points is: Pivot = (High + Low + Close) / 3 | R1 = 2×Pivot - Low | S1 = 2×Pivot - High
Why is Pivot Points important?
Pivot Points helps investors evaluate technical analysis and make more informed decisions.