Pivot Level

Pivot point is a point of rotation. It’s the level where market price is potentially being rotated back to where market price came from or being continued and making significant distance from pivot point.

Pivot point calculated by using previous period’s high, low, and closing prices taken from the daily chart. Most of traders use pivot level together with support and resistance levels to predict daily market price movement.

Every day the market you are following has an open, high, low and a close for the day (some markets like forex are 24 hours but generally use New York market’s closing time as the open and close). This information basically contains all the data you need to use pivot points.


In order to calculate pivot level, we need 3 prices which are:

H = previous period’s high price
L = previous period’s low price
C = previous period’s closing price


Then calculate pivot level using this equation:
Pivot Point (PP) = (High + Low + Close) / 3

Support and resistance levels are then calculated off of this pivot point using the following formulas:

Resistance:
R1 = Resistance Level 1 = (2*PP)-L
R2 = Resistance Level 2 = (PP-S1) + R1
R3 = Resistance Level 3 = (PP-S2)+R2

Support:
S1 = Support Level 1 = (2*PP)-H
S2 = Support Level 2 = PP - (R1 - S1)
S3 = Support Level 3 = PP - (R2-S2)