Pivot point

A pivot point is a price level calculated from a prior trading period's high, low, and close, used by short-term traders to gauge where a stock is likely to find support or resistance during the current session. Because it is derived purely from arithmetic rather than judgment, pivot points give traders a consistent, repeatable reference level to plan entries, exits, and stop placement around.

The most common version, the standard pivot point, is calculated as the average of the prior period's high, low, and closing price. From that central pivot, traders derive a series of support and resistance levels above and below it, typically labeled R1, R2, and R3 for resistance and S1, S2, and S3 for support, each calculated using variations on the high, low, and pivot figures. If a stock is trading above the pivot point, that is generally read as a sign the session has a bullish bias, while trading below the pivot suggests a bearish bias.

The formula is:

Pivot points are used heavily in day trading and intraday futures and forex trading, where the prior period is usually the previous full trading day, but the same logic can be applied using weekly or monthly data for longer time frames. Because so many market participants watch the same standard calculation, these levels can become somewhat self-fulfilling, price often does react near a pivot level simply because enough traders are placing orders around it, which is part of why the tool remains popular despite being a purely mechanical calculation with no connection to a company's fundamentals.