top of page
Anchor 1

What is Pivot Point trading ?

Pivot points are important levels for the traders and investors who can use them to determine directional movement of the price and find potential support and resistance levels. In calculating pivot points, previous period's high, low and close are used to estimate future support and resistance levels. In this sense, pivot points are mathematically derived predictive or leading indicators. Pivot points are used by traders to predict market trends and identify potential reversal points too. 

Here are some scenarios where pivot points can be applied and useful effectively:​

  • Identifying market sentiments: Pivot points provide a quick assessment of market direction and trend. If price opens above the pivot point and remains above it, traders interpret this as an uptrend. Conversely, if price opens below the pivot point and stays below it, it suggests a downtrend.

  • Determining support & resistance levels: Pivot points help traders identify potential areas where price might find its support and face resistance. Traders may take long positions near support levels and may think to take short position, if the price reaches resistance levels. 

  • Finding Breakout Opportunities: When price breaks above one resistance level or below one support level, it tries to reach another level second resistance or support and so on. Thus, traders use pivot points to identify potential breakout opportunities for profitable trades. 

  • Reversal identification: Using pivot points, traders also look for failed breakout or price rejection at various resistance or support levels and anticipate reversal from that level. 

  • Setting stop-loss and take-profit levels: Traders can use pivot points to set strategic stop-loss and take-profit levels easily. 

Pivot points1.png

How to calculate Pivot Points (PP)
​
Pivot points were originally used by traders to set key levels for short-term focus. At the beginning, they look at previous period's high, low and close to calculate a Pivot Point for current trading period. Considering this Pivot Point as the base, further various support and resistance levels calculated. Thus, Pivot point serves as the primary reference level. All these levels are used to take trading decision throughout the current trading period.   
​​
Standard Pivot Points

​Standard pivot points are widely used to identify potential support and resistance levels for a particular trading period. Standard pivot point is a simple average of high, low and close of the previous period. It is a solid middle point between other support and resistance levels. 
​
Formula for Standard Pivot Points: ​​​​​​​​​

Anchor 2

   P   =   ( High + Low + Close ) / 3 

   R1 =   ( P * 2 )  –  Low

   R2 =   P + ( High – Low )

   R3 =   High + 2 * ( P – Low )​

   S1 =   ( P * 2 )  –  High

   S2 =   P - ( High –  Low)

   S3 =   L  -  2 * (High –  P )

 ← Where →

   P   =   Pivot Point

   R1 =   Resistance 1

   R2 =   Resistance 2

   R3 =   Resistance 3

   S1 =   Support 1

   S2 =   Support 2

   S3 =   Support 3

  • High indicates the highest price of the previous period (day)

  • Low indicates the lowest price of the previous period (day)

  • Close indicates the closing price of the previous period (day)

Fibonacci Pivot Points

Anchor 3

Fibonacci piovt points integrate Fibonacci retracement levels with pivot points calculations to enhance market analysis. This method uses Fibonacci ratios to calculate potential support and resistance levels, combining historical price data with Fibonacci ratios. This approach can provide traders with more nuanced insights in to potential price movements.

Pivot Point  (P)  =  ( High  +  Low  +  Close  )  /  3

Resistance 1  (R1)   =  P  + { 0.382  *  ( H  –  L ) }

Resistance 2  (R2)   =  P  + { 0.618  *  ( H  –  L ) }

Resistance 3  (R3)   =  P  + { 1  *  ( H   –  L ) }
​
Support 1  (S1)        =  P  -  {  0.382  *  ( H  –  L ) }
​
Support 2  (S2)        =  P  -  {  0.618  *  ( H  –  L ) }
​
Support 3  (S3)        =  P  -  {  1  *  ( H  –  L ) }​​
 

Camarilla Pivot Points

Anchor 4

Camarilla pivot points are calculated using a unique formula that emphasizes the closing price and uses a specific number of levels to guide trading decisions. These pivot points are used to predict reversal movements and are particularly useful to intraday traders. The calculations involve complex formulas that consider the closing price and a multiplier to determine the support and resistance levels. 

Resistance 1  (R1)   =  ( High  –  Low )  *  1.1 / 12  + Close

Resistance 2  (R2)   =  ( High  –  Low )  *  1.1 /  6  + Close

Resistance 3  (R3)   =  ( High  –  Low )  *  1.1 /  4  + Close

Resistance 4  (R4)   =  ( High  –  Low )  *  1.1 /  2  + Close
​
Support 1  (S1)        =  ( High  –  Low )  *  1.1 /  12  – Close
​
Support 2  (S2)        =  ( High  –  Low )  *  1.1 /  6  – Close
​
Support 3  (S3)        =  ( High  –  Low )  *  1.1 /  4  – Close

Support 4  (S4)        =  ( High  –  Low )  *  1.1 /  2  – Close

Woodie's Pivot Points

Anchor 5

Woodie's Pivot Points is a trading indicator which shows a set of calculated pivot point levels used by traders to identify potential support and resistance areas. Based on the past data, these pivot points help traders predict possible price reversal and breakouts. Unlike traditional pivot point calculation methods where even weight is distributed among high, low and close price of previous period, Woodie's Pivot Points place more emphasis on closing price. This approach of Woodie's Pivot Points makes them more responsive to recent movements around pivot points.

Woodie's Pivot Points are calculated using a unique formula that differs from the standard method. 

Pivot Point  (PP)  =  ( 2 * Close  +  High  +  Low ) / 4

Resistance 1  (R1)   =  ( 2 *  PP)  –  Low

Resistance 2  (R2)   =  PP  +  ( High  –  Low  ) 
​
Support 1  (S1)        = ( 2 *  PP)  –  High
​
Support 2  (S2)        =  PP  –  ( High  –  Low  ) ​

Giving more emphasis on the close price, Woodie's Pivot Points adjust more quickly to intraday price movements and make them more useful for traders who are engaged in short term trading. 

DeMark's Pivot Points

Anchor 6

DeMark's Pivot Points differ from other pivot point methods by considering the relationship between the opening price and the closing price. DeMark's Pivot points adapt to real market conditions dynamically. This makes them more useful for intraday and short-term traders. Since DeMark Pivot Points dynamially adjust based on price behavior, they provide a structured framework for defining trade entries and exits. 

Unlike traditional pivot points calculation which uses fixed formulas, DeMark Pivot points are calculated on the base whether the close was higher or lower or equal to the open during the previous period. The calculation involves a pivot value and subsequently calculations for support and resistance levels are done.

       ​Firstly, value of  X  is determined, 

​​

  • If close is lower than open  
    ( i.e. close  <  open ), then 

    X  =  ( High  +  2 * Low  +  Close )  /  4
     

  • If close is higher than open  
    ( i.e. close  >  open ), then 

    X  =  ( 2 * High  +  Low  +  Close )  /  4

 

  • If close is equal to open  
    ( i.e. close  =   open ), then 

    X  =  High  +  Low  +  ( 2 * Close )  /  4

​

 Once value of  X  is determined, the pivot point formula to calculate key levels as follows :

​

  • Pivot  Point (PP)  =  X  /  4

​

  • Resistance (R)    =   X  /  2  –  Low

​

  • Support (S)         =    X  /  2  –  High​
    ​​​

If the market opens above the pivot point, it suggests bullish momentum, and traders may favor long positions.

If the market opens below the pivot point, it suggests bearish momentum, traders may favor short positions.

When price approaches resistance level, traders look for signs of weakness to initiate short position.

When price reaches near the support level, traders watch for buying pressure.

A strong break above the support (supply) level suggests continued bullishness and give presumption of further rise in price.

A decisive break below the supoprt level may indicate continuous bearish pressure signalling a down trend. 

Which Pivot Points are the best ?

The choice of type of pivot points depends upon the trader's strategy and preferences. Standard pivot points are widely used due to their simplicity and effectiveness. Other pivot points like Fibonacci and Camarilla can provide additional insights. 

For intraday and short-term trading, standard pivot points are often recommended due to their straightforward calculations and practical applications. These pivot points offer a balanced approach to identify support and resistance levels and to take quick and effective decisions.

The difference between standard pivot points and Fibonacci retracement lies in their calculation and application. Stand pivot points are based on previous trading data means historical data, where Fibonacci retracements use Fibonacci ratios to identify reversal points. Both tools help traders anticipate market movements but are used in slightly different ways to analyze the trends and price levels. Fibonaaci retracements are useful for analyzing longer term markets. They provide additional insights for more complex analysis and strategy. 

The traders should be aware of the fact that pivots are based on historical data which may not always predict future market conditions correctly. Additionally pivot points are less effective in market which low liquidity or extreme volatility. To solve this limitation of pivot points, traders should use them with other technical tools like moving averages, candlestick patterns, RSI, stochastics, MACD,  
 

bottom of page