Pivot points are a set of price levels calculated from the previous session's high, low, and close, used to anticipate where support and resistance might appear during the current session. They originated on trading floors, where traders needed a quick reference calculated by hand before the open.
The Classic Formula
PP = (High + Low + Close) / 3R1 = (2 x PP) - Low | S1 = (2 x PP) - HighR2 = PP + (High - Low) | S2 = PP - (High - Low)R3 = High + 2 x (PP - Low) | S3 = Low - 2 x (High - PP)The pivot point itself acts as the main reference — price trading above it is considered bullish for the session, while price trading below it is considered bearish. The R and S levels around it act as potential turning points or targets.
Using Pivot Levels Intraday
| Level | Typical use |
|---|---|
| R2/R3 | Extended upside targets or potential exhaustion zones in a strong rally. |
| R1 | First resistance; common area for taking partial profits or watching for a reaction. |
| PP | Central pivot; bias line separating bullish from bearish sentiment for the day. |
| S1 | First support; common area for taking partial profits on short positions or watching for a bounce. |
| S2/S3 | Extended downside targets or potential exhaustion zones in a strong decline. |
Trading Approaches
- ▸Range approach: fade moves toward R1/S1 when the broader market is directionless, expecting a reaction back toward the pivot.
- ▸Breakout approach: treat a decisive break of R1 or S1 with strong momentum as a signal that the level failed and price may run to the next level.
- ▸Bias filter: use the position of price relative to PP as a simple daily bias — only look for longs above PP and shorts below it.
Besides the classic formula, traders also use Fibonacci pivots, Camarilla pivots, and Woodie's pivots, each weighting the high, low, and close differently. They tend to produce levels close to each other and are used the same way.
Pivot levels are most useful when they align with other structure such as prior swing highs/lows or round numbers. Treating every pivot line as a guaranteed reaction point ignores that they are a mathematical derivation, not a law of the market.