Pivot Point Calculator

Pivot Points originated in the trading pits.  Floor traders could make some simple calculations before the markets opened and arm themselves with the market's likely support and resistance points during the trading day.

The pivot point calculator uses 3 inputs - the previous days high, low and close.  From this are calculated the pivot point, 3 areas of likely support and 3 areas of likely resistance.  The pivot point represents mid point of the market - above and the market is bullish, below and it is seen as bearish.

Pivot points are enormously popular, even on today's electronically traded markets.  Because a lot of traders are watching these points the markets will often react at these levels.  In fact, some commercially available systems and websites use nothing more than pivot points to form buy and sell signals.

So, how are these levels calculated?  Well here is the magic formula:

Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

Pivot Point Calculator
High
Low
Close

Pivot Point
Resistance 1
Resistance 2
Resistance 3
Support 1
Support 2
Support 3

To simplify things, just use the calculator above, or download a handy desktop calculator here.

There are a number of ways to use the pivot points that have been calculated:

Breakouts.

Simply, we use R1 as a buy signal and S1 as a sell signal.  R2/S2 and R3/S3 can then be used as targets.  For example, when the market opens we would place a buy stop at R1 and a sell stop at S1.  Say, our buy stop is triggered, we then have a natural stop at S1 already in the market.  We could then place a limit to sell 1/2 our order at R2 and another limit to sell the other half at R3.  If R2 is hit then we could raise our stop to the pivot point or even R1.

 

Reversals.

We could use R1 as a sell signal or S1 as a buy signal, with stops at R2 and S2.  Equally we could use R2/S2 as sell/buy signals with stops at R3/S3.

 

Combinations.

We can combine a breakout system with a reversal system.  So, we buy a break of R1, with a stop at S1 and a target/reverse at R2.  If R2 is reached we then sell with a stop at R3 and a target of the pivot point.

 
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