Overlays · Indicator
Pivot points derive a central level plus three support and three resistance levels from the previous period's high, low and close.
Overview
Pivot points are classic floor-trader levels. The pivot itself is the average of the previous period's high, low and close, and from it a ladder of levels is derived: R1, R2 and R3 above as resistance and S1, S2 and S3 below as support. They are widely referenced by market makers and algorithms for intraday structure, which is a large part of why price so often reacts at them.
The levels originated on trading floors, where a trader needed a small set of reference numbers that could be calculated by hand before the open and carried in a pocket for the session. That constraint produced a formula that uses only three inputs and simple arithmetic, and the same numbers are still computed identically by a large number of participants today.
Unlike most indicators, pivot levels are static for the whole period. They are calculated once from the previous period's data and drawn as flat horizontal lines that do not move as price develops. That makes them a structural map rather than a signal generator: they tell you in advance which prices a lot of other people will be watching, not what the market is about to do.
How it is calculated
The pivot is the simple average of the previous completed period's high, low and close. The first support and resistance levels reflect the pivot mirrored around the previous high and low; the second pair add the previous period's full range to the pivot; the third pair extend further still.
The formula shown is the classic or floor-trader variant. Other variants such as Woodie, Camarilla and Fibonacci pivots weight the inputs differently and produce different levels from the same data.
H, L, C are the previous period's high, low and close PP = (H + L + C) / 3 R1 = 2 * PP - L S1 = 2 * PP - H R2 = PP + (H - L) S2 = PP - (H - L) R3 = H + 2 * (PP - L) S3 = L - 2 * (H - PP)
Inputs
How to read it
The pivot itself is the primary reference. Price trading above it for the period is conventionally read as a bullish bias and below it as bearish, with the level often acting as the day's dividing line between the two. Many intraday approaches use nothing more than the side of the pivot to set directional bias.
The outer levels function as a rough map of how far the period is likely to travel. Reaching R1 or S1 is routine; reaching R3 or S3 requires a large directional day and happens rarely, so the outer levels are more often used as targets than as places to initiate positions.
Confluence is what makes any individual level worth watching. A pivot level that coincides with the previous session's high, a round number, a moving average or VWAP attracts more orders than one sitting in empty space. Traders generally treat isolated pivot levels as weak and clustered ones as significant.
Signals to look for
The open relative to the pivot, and whether price holds that side, is used as a simple directional filter for the period. Crossing back through the pivot is treated as a change in intraday control.
Price approaching a support or resistance level and reversing is the most common use. The level provides an objective reference for where the idea would be considered wrong.
A decisive break through a level followed by a return to it that holds is read as the level flipping from resistance to support or the reverse, which is a standard structural reading rather than a pivot-specific one.
R1 and S1 are commonly used as first targets on a directional day, with R2 and S2 as extended targets when the move has momentum behind it.
Limitations
Frequently asked questions
Pivot points derive a central level plus three support and three resistance levels from the previous period's high, low and close.
The pivot itself is the primary reference. Price trading above it for the period is conventionally read as a bullish bias and below it as bearish, with the level often acting as the day's dividing line between the two. Many intraday approaches use nothing more than the side of the pivot to set directional bias.
Pivot bias: The open relative to the pivot, and whether price holds that side, is used as a simple directional filter for the period. Crossing back through the pivot is treated as a change in intraday control.
The levels are derived purely from three numbers of the previous period and contain no information about volume, volatility or current conditions. A quiet previous day produces tight levels regardless of what happens next.
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