Pivot points explained: how to calculate daily pivot, support and resistance levels

Pivot points are price levels calculated from the previous period's high, low and close. Floor traders in futures pits used them for a quick map of the day, and they're still popular because everyone using the same data gets the same levels.

The standard formulas

With the previous day's high (H), low (L) and close (C):

• Pivot (P) = (H + L + C) ÷ 3
• R1 = 2 × P − L
• S1 = 2 × P − H
• R2 = P + (H − L)
• S2 = P − (H − L)
• R3 = H + 2 × (P − L)
• S3 = L − 2 × (H − P)

A worked example

A hypothetical EUR/USD day with a high of 1.1250, a low of 1.1150 and a close of 1.1220, rounded to four decimals at the end:

• P = (1.1250 + 1.1150 + 1.1220) ÷ 3 = 1.12067, or 1.1207
• R1 = 2 × 1.12067 − 1.1150 = 1.1263
• S1 = 2 × 1.12067 − 1.1250 = 1.1163
• R2 = 1.12067 + 0.0100 = 1.1307
• S2 = 1.12067 − 0.0100 = 1.1107
• R3 = 1.1250 + 2 × 0.00567 = 1.1363
• S3 = 1.1150 − 2 × 0.00433 = 1.1063

Which close?

Forex trades around the clock, so the "day" has to be defined. The most common convention is the New York 5 p.m. close, which is also when many brokers roll positions over and charge swap. A chart set to another time zone produces different highs, lows and closes, and so different pivots. Check which session your platform uses before comparing levels with other traders.

How traders use them

• Tone for the day: price holding above the pivot is read as positive, below it as negative.
• Targets and stops: R1 and S1 are reached most often. R3 and S3 are usually only reached on days with major news.
• Confluence: a pivot level near a round number, an earlier swing or a Fibonacci retracement deserves more attention than one on its own.

Variations

Fibonacci pivots place support and resistance at 38.2%, 61.8% and 100% of the previous day's range away from the pivot. Camarilla and Woodie pivots weight the close differently and produce tighter levels. None has been shown to be better; the standard version is simply the most widely watched.

Pivots are a map drawn from yesterday's prices. On days dominated by a central bank decision or a jobs report, price can cut through several levels in minutes.