Understanding Daily Pivot Points

Yaser Rahmati | یاسر رحمتی

What are Pivot Points?

Pivot points are technical analysis indicators used to determine the overall trend of the market over different time frames. The pivot point itself is the average of the high, low, and closing prices from the previous trading day. This central pivot point can then be used to calculate further support and resistance levels.

How to Calculate Daily Pivot Points

The formula to calculate the main pivot point (P) is:

P=(High+Low+Close)3P=\frac{(High+Low+Close)}{3}

Based on this pivot point, you can then calculate the support and resistance levels:

First Level Support (S1):

S1=2P−HighS1=2P−High

First Level Resistance (R1):

R1=2P−LowR1=2P−Low

Second Level Support (S2):

S2=P−(High−Low)S2=P−(High−Low)

Second Level Resistance (R2):

R2=P+(High−Low)R2=P+(High−Low)

Third Level Support (S3):

S3=Low−2(High−P)S3=Low−2(High−P)

Third Level Resistance (R3):

R3=High+2(P−Low)R3=High+2(P−Low)

Numerical Example

Let’s calculate the pivot points using the following hypothetical data from the previous trading day:

  • High (H): 1.2000

  • Low (L): 1.1800

  • Close (C): 1.1900

1. Calculate the Pivot Point (P):

P=(1.2000+1.1800+1.1900)3=1.1900P=\frac{(1.2000+1.1800+1.1900)}{3}=1.1900

2. First Level Support (S1):

S1=2P−High=2(1.1900)−1.2000=2.3800−1.2000=1.1800S1=2P−High=2(1.1900)−1.2000=2.3800−1.2000=1.1800

3. First Level Resistance (R1):

R1=2P−Low=2(1.1900)−1.1800=2.3800−1.1800=1.2000R1=2P−Low=2(1.1900)−1.1800=2.3800−1.1800=1.2000

4. Second Level Support (S2):

S2=P−(High−Low)=1.1900−(1.2000−1.1800)=1.1900−0.0200=1.1700S2=P−(High−Low)=1.1900−(1.2000−1.1800)=1.1900−0.0200=1.1700

5. Second Level Resistance (R2):

R2=P+(High−Low)=1.1900+(1.2000−1.1800)=1.1900+0.0200=1.2100R2=P+(High−Low)=1.1900+(1.2000−1.1800)=1.1900+0.0200=1.2100

6. Third Level Support (S3):

S3=Low−2(High−P)=1.1800−2(1.2000−1.1900)=1.1800−2(0.0100)=1.1800−0.0200=1.1600S3=Low−2(High−P)=1.1800−2(1.2000−1.1900)=1.1800−2(0.0100)=1.1800−0.0200=1.1600

7. Third Level Resistance (R3):

R3=High+2(P−Low)=1.2000+2(1.1900−1.1800)=1.2000+2(0.0100)=1.2000+0.0200=1.2200R3=High+2(P−Low)=1.2000+2(1.1900−1.1800)=1.2000+2(0.0100)=1.2000+0.0200=1.2200

Summary of Calculated Pivot Points

  • Pivot Point (P): 1.1900

  • Support 1 (S1): 1.1800

  • Resistance 1 (R1): 1.2000

  • Support 2 (S2): 1.1700

  • Resistance 2 (R2): 1.2100

  • Support 3 (S3): 1.1600

  • Resistance 3 (R3): 1.2200

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