Pivot Point Calculations

What are Pivot Points?

Pivot points are technical analysis indicators used to determine potential support and resistance levels in trading. They are calculated based on the previous day’s high, low, and closing prices, and are commonly used by traders to identify key price levels for making trading decisions.

How to Calculate Pivot Points

There are several different methods for calculating pivot points, but the most commonly used is the classic method. To calculate pivot points using the classic method, follow these steps:

Step 1: Calculate the Pivot Point

To calculate the pivot point, add the previous day’s high, low, and closing prices together and divide by 3. The formula is as follows:
Pivot Point = (High + Low + Close) / 3

Step 2: Calculate Support and Resistance Levels

Once you have calculated the pivot point, you can then calculate the support and resistance levels. The formula for calculating these levels is as follows:
Support 1 = (2 x Pivot Point) – High
Resistance 1 = (2 x Pivot Point) – Low
Support 2 = Pivot Point – (High – Low)
Resistance 2 = Pivot Point + (High – Low)

Using Pivot Points in Trading

Pivot points can be used in a variety of ways in trading. Some traders use them to identify potential entry and exit points, while others use them to set stop-loss orders or take-profit levels. By paying attention to pivot points, traders can gain insight into market sentiment and potential price movements.

Conclusion

Pivot point calculations are a valuable tool for traders looking to identify key price levels in trading. By understanding how to calculate pivot points and how to use them in trading, traders can make more informed decisions and potentially improve their trading results.