Complete explanation of Pivot Points + automatic calculation of support and resistance

What is a pivot point?

Pivot Points is a tool that automatically calculates today's support and resistance lines using the previous day's high (H), low (L), and closing price (C). You can mechanically identify support/resistance levels without manually analyzing charts.

It is a tool of professional traders that has been used for a long time in traditional financial markets (stocks, futures, forex).

Standard pivot point calculation formula

Pivot(P) = (Previous day's high + Previous day's low + Previous day's close) / 3

Resistance line: 
R1 = (2 × P) – previous day’s low price 
R2 = P + (previous day's high - previous day's low) 
R3 = previous day's high + 2 × (P - previous day's low)

Support line: 
S1 = (2 × P) – previous day’s high 
S2 = P - (Previous day's high - Previous day's low) 
S3 = previous day's low - 2 × (previous day's high - P) 

Meaning of each level

Pivot point utilization strategy

Strategy 1: Determine direction based on pivot (P)

Price > P: Bullish market bias → Long preference, caution with shorting at resistance level 
Price < P: Bear market bias → Prefer short, Be careful of long at the support line

The direction in which the price breaks through P determines the trend for the day. 

Strategy 2: Trading S1/R1 bounce

The most frequently used strategies: 
Rebound candle appears at S1 (support line) → Long → P is the target 
A downward candle appears at R1 (resistance line) → Short → P is the target

S1, R1 are the most tested levels in daily sessions 

Strategy 3: Following trend after S/R breakout

Price strongly breaks through R1 + volume: 
→ R2 is the next target → Long trend trading

Price breaks strongly from S1: 
→ S2 is the next target → Short trend trading 

Fibonacci pivot vs standard pivot

There are two ways to choose from on any exchange chart:

Related guides

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