Using Pivot Points & How to Calculate Them
Pivot Points are widely used in technical analysis to identify potential support and resistance levels. These horizontal lines help traders anticipate where price action might reverse, pause, or accelerate. They are particularly useful for short-term strategies such as intraday trading.
While many charting platforms plot pivot points automatically, you can also calculate them manually using price data from your previous trading session.
What are pivot points?
Pivot Points are predefined support and resistance levels derived from the high, low, and close prices of the previous trading session. They help traders:
Gauge market sentiment (bullish above the pivot, bearish below the pivot)
Identify potential reversal zones
Improve trade entry and exit timing
They are especially popular in forex, futures, and stock index trading.
How to calculate pivot points
Pivot Levels are calculated using three types of information from the previous trading day: High Price, Low Price, and Close Price.
While there are several methods for calculating pivot points, the most common one is the five-point system, which calculates:
1 Pivot Point (P)
2 Resistance levels (R1, R2)
2 Support levels (S1, S2)
Here are the equations:
P = (High + Low + Close) / 3
R1 = (2 x P) - Low
R2 = P + (High - Low)
S1 = (2 x P) - High
S2 = P - (High - Low)
Where:
High = Previous session’s highest price
Low = Previous session’s lowest price
Close = Closing price of the previous session
These five levels can act as reference points throughout the next trading day.
Pivot Point, R1 and S1 are the most important Pivot Levels, but we can also calculate the R2 and S2. Hence, we will have 5 horizontal lines on our chart: R1, R2, Pivot Point, S1 & S2
How to plot pivot points
In 24-hour markets like forex, the high, low, and close are often based on New York closing time (5:00 PM EST). To plot your pivot points:
Review the previous day’s candlestick
Note the high, low, and close
Plug them into the formulas
Plot the resulting five levels on your chart
You can also apply this method to shorter timeframes (e.g. 1-hour or 5-minute charts) depending on your trading strategy.
Example calculation
Let’s say we’re trading on January 15, and we use the previous day’s (January 14) data:
High = 1.1659
Low = 1.1633
Close = 1.1648
Plugging into the formula:
P = (1.1659 + 1.1633 + 1.1648) / 3 = 1.1647
R1 = (2 × 1.1647) – 1.1633 = 1.1660
R2 = 1.1647 + (1.1659 – 1.1633) = 1.1673
S1 = (2 × 1.1647) – 1.1659 = 1.1634
S2 = 1.1647 – (1.1659 – 1.1633) = 1.1621
So, your five plotted levels would be:
R2: 1.1673
R1: 1.1660
Pivot: 1.1647
S1: 1.1634
S2: 1.1621
However, like any other indicator, pivot points do not guarantee 100% accuracy and may occasionally fail to predict price movements. Nevertheless, as previously explained, it’s beneficial to include them on your charts, even if your trading strategy does not rely solely on pivot points. These levels often mark potential areas where the price could react throughout the trading day.
Pivot Points are widely used in technical analysis to identify potential support and resistance levels. These horizontal lines help traders anticipate where price action might reverse, pause, or accelerate. They are particularly useful for short-term strategies such as intraday trading.
While many charting platforms plot pivot points automatically, you can also calculate them manually using price data from your previous trading session.
