Pivot Point

What Is a Pivot Point?

A pivot point is a reference price used in technical analysis to judge where a market may pause, reverse, or break through during a trading session. Traders typically calculate it at the start of a day, week, or month using the high, low, and closing prices from the previous period of the same length. The central pivot is then surrounded by additional levels that act as potential support level and resistance level markers.

Pivot points are most common in futures contract and foreign exchange markets, where day trading is frequent and prices often move around a central reference level. They are widely watched because many market participants use the same formulas, which can make the levels self-reinforcing to some degree.

How It Is Calculated

The standard central pivot is the average of the prior period's high (H), low (L), and closing price (C):

P = (H + L + C) / 3

From the pivot, the most common levels are derived as follows:

R1 = (2 × P) − L S1 = (2 × P) − H R2 = P + (H − L) S2 = P − (H − L)

Here R1 and R2 are resistance levels above the pivot, and S1 and S2 are support levels below it.

Example

Suppose a stock's previous session had a high of 110, a low of 100, and a close of 105. The pivot is (110 + 100 + 105) / 3 = 105. The first resistance is (2 × 105) − 100 = 110, and the first support is (2 × 105) − 110 = 100. A trader watching this market would see 100 to 110 as a range that prices might test during the next session, though nothing guarantees the market will respect these levels.

Limitations

Pivot points are simple, rule-based estimates, not forecasts. Prices often move past them without pausing, and results depend heavily on the market and time frame. Because they use only three prices from one prior period, they ignore volume, trend, and news. Many investors use them alongside other indicators, such as moving average lines, rather than on their own.