What It Is
Pivot points are calculated support and resistance levels derived from the previous period's high, low, and close. The central pivot (PP) is the average of these three values, with support and resistance levels (S1-S3, R1-R3) calculated symmetrically above and below.
Key insight: Pivot points are self-fulfilling because institutional traders, market makers, and algorithms all watch them. The daily pivot is particularly powerful because it represents the previous session's equilibrium — a starting point for the current session's directional bias.
Multiple calculation methods exist: Standard, Fibonacci, Woodie's, and Camarilla. Each produces slightly different levels. Standard pivots are most widely used and therefore most likely to generate reactions.
Trading With Pivots
Price above the central pivot suggests bullish bias for the session. Price below suggests bearish. This simple filter — only taking longs above the pivot and shorts below — improves many trading strategies.
S1 and R1 are the most commonly tested levels. Price reaching S1 in an overall uptrend often bounces — these are high-probability pullback buy zones. R1 in a downtrend offers short opportunities.
When price breaks through R1 with volume, it often runs to R2. S1 breaks similarly target S2. Use the next pivot level as your initial profit target.
Apply this concept in combination with others. No single concept tells the whole story - confluence is key.
Continue through core concepts
Compare this reference with related structures and readings before applying it to a live chart.