Pivot Point Calculations

What are Pivot Points?

Pivot points are technical indicators used by traders to determine potential support and resistance levels in the financial markets. They are calculated using the previous day’s high, low, and closing prices.

How to Calculate Pivot Points

There are several different methods for calculating pivot points, but the most commonly used method is the Standard Pivot Point Formula. This formula is as follows:
Pivot Point (P) = (High + Low + Close) / 3
Support 1 (S1) = (2 * P) – High
Support 2 (S2) = P – (High – Low)
Resistance 1 (R1) = (2 * P) – Low
Resistance 2 (R2) = P + (High – Low)

Using Pivot Points in Trading

Once pivot points are calculated, traders can use them to identify potential entry and exit points for their trades. For example, if the price is trading above the pivot point, it may be considered bullish, and traders may look for buying opportunities. Conversely, if the price is trading below the pivot point, it may be considered bearish, and traders may look for selling opportunities.

Benefits of Pivot Points

– Pivot points can help traders identify key levels of support and resistance in the market.
– They can be used to determine potential entry and exit points for trades.
– Pivot points can help traders set stop-loss and take-profit levels for their trades.

Conclusion

Pivot point calculations are a valuable tool for traders looking to identify potential support and resistance levels in the financial markets. By using pivot points in conjunction with other technical indicators, traders can make more informed trading decisions and improve their overall trading performance.