From yesterday's high, low and close,a pivot marks where today may pose.
A technical indicator calculated from the previous period’s high, low, and close prices, used to identify potential support and resistance levels.
Pivot points are widely used by day traders.
In plain words
A pivot point is a price level worked out from the previous period’s high, low and close, most often the previous day’s. In the classic method the pivot is the average of those three prices, and further levels above and below it, called resistance and support, are derived from it.
See it move
Moving between Resistance 1 and Support 1
Why it matters
Because the calculation is fixed and widely known, many short-term traders look at the same levels and use them as reference lines for the session. The price is under no obligation to stop or turn at them.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
Yesterday’s high was 1.2100, the low 1.2000 and the close 1.2080.
- 1Pivot(1.2100 + 1.2000 + 1.2080) ÷ 3 = 3.6180 ÷ 3 = 1.2060
- 2First resistance2 × 1.2060 − 1.2000 = 1.2120
- 3First support2 × 1.2060 − 1.2100 = 1.2020
Today’s reference levels are 1.2020, 1.2060 and 1.2120.
A common mistake
Pivot levels are sometimes treated as barriers in the market. They are arithmetic on yesterday’s prices, and there are several methods that give different levels from the same data.
Check yourself
Educational information, not investment advice or a recommendation to trade.