If you invest and trade financial assets such as forex, stocks, commodities, bonds, or cryptocurrencies via online exchanges, using the pivot points calculator may be fundamental to your success.

This pivot point calculator can help you determine significant support and resistance levels if you provide the high, low, and close price for the timeframe with the highest volume and most liquidity in trades. You can also use the information with other trading indicators, like the Fibonacci retracement, to assess the market trend and decide when is a good time to enter or exit trades. This article will discuss several pivot points formulas, how to calculate pivot points, and how to use them practically in your trading journey.

What is a pivot point? Pivot point definition

A pivot point is a technical analysis indicator that predicts support and resistance levels in trading.

Resistance levels are points on a price chart where an asset's upward price trend pulls back or falls because of selling pressure. In contrast, Support levels are the points reached before the asset ratio starts another upward trend because of buying pressure.

Professional traders use supports and resistance levels to determine when to buy or sell an asset and to set stop-loss or take profits. You can use a previous trading session's high, low, and close price to determine the support and resistance levels of a current or upcoming trading session.

But keep in mind that support and resistance levels are not concrete price numbers. It would be best to employ them as zones where price movement direction can probably change. And to get the best results for your prediction, pick a timeframe with the highest volume and most liquidity.

Types of pivot points

There are different types of pivot point calculation methods. They include:

  • Floor pivot points;
  • Woodie pivot points;
  • Camarilla pivot points;
  • Fibonacci pivot points; and
  • Tom DeMark's pivot points.

How to calculate pivot points? Pivot points formulas

The standard pivot point calculation technique is the floor pivot points method. This popular method is a five-point system that uses the high, low, and close price of a previous day to derive the pivot point, two support levels, and two resistance levels. We can also estimate the third support and resistance level for extreme trading ranges, giving a total of three of both support and resistance levels.

Floor pivot points

The pivot points formulas are as follows:

  • PP = (H + L + C) / 3;
  • R1 = (2 * PP) - L;
  • S1 = (2 * PP) - H;
  • R2 = PP + (R1 - S1);
  • S2 = PP - (R1 - S1);
  • R3 = H + 2 * (PP - L); and
  • S3 = L - 2 * (H - PP),

where:

  • PP - Pivot point;
  • H - Previous day's high;
  • L - Previous day's low;
  • C - Previous day's close;
  • R - Resistances levels; and
  • S - Supports levels.

Since many traders use the same pivot points as they mostly use the floor calculation method, the market reactions at the support and resistance levels are almost self-fulfilling. Some traders look for ways to improve their strategy and overall returns against the consensus, and, at the same time, maintain the objectivity of the floor method of calculating pivot points. Therefore, the other pivot points methods are mostly variations to the standard method to improve the support and resistance levels results.

Woodie pivot points

  • PP = (H + L + (2 * C)) / 4;
  • R1 = (2 * PP) - L;
  • S1 = (2 * PP) - H;
  • R2 = PP + H - L; and
  • S2 = P - H + L.

Camarilla pivot points:

  • PP = (H + L + C) / 3;
  • R1 = C + ((H -L * 1.1/12);
  • S1 = C - ((H -L) * 1.1/12);
  • R2 = C + ((H - L) * 1.1/6);
  • S2 = C - ((H - L) * 1.1/6);
  • R3 = C + ((H - L) * 1.1/4);
  • S3 = C - ((H - L) * 1.1/4);
  • R4 = C + ((H - L) * 1.1/2); and
  • S4 = C - ((H - L) * 1.1/2).

Fibonacci pivot points:

  • PP = (H + L + C) / 3;
  • R1 = PP + ((H - L) * 0.382);
  • S1 = PP - ((H - L) * 0.382);
  • R2 = PP + ((H - L) * 0.618);
  • S2 = PP - ((H - L) * 0.618);
  • R3 = PP + ((H - L) * 1.000); and
  • S3 = PP - ((H - L) * 1.000).

Tom DeMark's pivot points:

The Tom DeMark’s are not precisely pivot points; instead, they help traders predict the highs and lows of a trading session:

  • If Close < Open: X = H + (2 * L) + C;
  • If Close > Open: X = (2 * H) + L + C;
  • If Close = Open: X = H + L + (2 * C);
  • R1 = X / 2 - L; and
  • S1 = X / 2 - H.

You can use the high, low, and close from a day's standard trading hours for stocks. But, for 24-hour markets, most forex traders use the New York closing time (5 p.m. EST) as the previous day's close, while many crypto traders opt to use 23:59 GMT to close a trading session and 00:00 GMT for the opening of a new session. But you don't have to worry about these since most charting softwares will automatically determine these values for you on candlestick patterns.

How to use the pivot point calculator?

The Omni pivot point calculator is the only pivot point calculator app you'll need for any price chart. All you have to do is provide the high price, low price, and close price for an asset, and the calculator will determine pivot points for its chart. You can select between the Floor, Woodie, Camarilla, Fibonacci, and DeMark's pivot points for your price analysis.

For instance, let's say you want to calculate the pivot points for a stock using its previous day's trading prices, which were High price = $150, Low price = $100, and Close price = $120:

  1. Choose the pivot point method you prefer from the dropdown menu. The Floor pivot point is the most commonly used, hence it is set as the default option;
  2. Input the values in the fields;
  3. Your results will appear instantly as follows:

R3 = $196.67;

R2 = $173.33;

R1 = $146.67;

PP = $123.33;

S1 = $96.67;

S2 = $73.33; and

S3 = $46.67.

You can also switch between the different types of pivot points to see the results for your price input.

How to trade pivot points?

In practice, you can use pivot points in different ways, such as:

  • Identifying the zones for setting stop loss and take profit orders during day trading. Using the previous day's chart data to determine the points of significant price movements can help you make good trades, especially when you combine pivot points with other technical analysis indicators.
  • You can calculate and use pivot points for any chart, be it over 15 minutes to even a week. If you prefer to swing trade, use a previous week's chart data to make pivot points for the current or upcoming week.
  • Pivot points help you identify the direction a market is moving – bullish if pivot point price gets broken in uptrend or bearish if the price drops through the pivot point price – so you can make strategic decisions accordingly.
  • Traders use pivot points to set limit orders for entering or exiting a market. Depending on your strategy, you may decide to buy an asset when it breaks through a resistance level or sell when it drops to a support level.

Limitations of pivot points

  1. Pivot points cannot replace your trading strategy. To ascertain your chances of a successful trade, you'll need to combine it with other technical analysis indicators and tools such as moving averages, MACD, RSI, stochastic, etc.
  2. Certain events or information can render your pivot point calculations useless. So always lookout for information from key players and the market movers.
  3. Markets can be irrational; relying on pivot points puts you in sync with the consensus. Sometimes, the best trades are bets against the market, irrespective of the pivot point definition.

FAQ

What is a pivot point in stocks trading?

A pivot point is a point on a price chart where the direction of price movement may change. Professional traders use pivot points to determine when to buy or sell an asset and when to set stop-loss or take profit orders.

How do I calculate pivot points in forex trading?

The standard method to calculate pivot points in forex trading is the floor method. If you know the previous day's high (H), low (L), and close (C), you can calculate the pivot point (PP), resistances (R), and supports (S) levels using the formulas:

  • PP = (H + L + C) / 3;
  • R1 = (2 * PP) - L;
  • S1 = (2 * PP) - H;
  • R2 = PP + (R1 - S1);
  • S2 = PP - (R1 - S1);
  • R3 = H + 2 * (PP - L); and
  • S3 = L - 2 * (H - PP).

How do I trade pivot points in forex trading?

Once you understand the pivot point meaning and how to calculate its associated resistance and support levels, you can use it as a guide to inform your trade decisions as a:

  • Range-bound trader by identifying the points where price range can reverse and place you buy or sell orders at these points;
  • Breakout forex trader to recognize critical support or resistance levels that need the price movement should break before you enter or exit a trade; or
  • The determiner of the overall market sentiment when the price is testing different levels.

Can I use pivot points when trading cryptocurrencies?

Yes. You can use pivot points in trading all forms of financial assets, especially if there is a price history. The pivot points help you predict the direction of prices for any asset.

Oghenekaro Elem
Pivot points calculation for trading
Method
Floor
High price
$
Low price
$
Close price
$
Result
Resistance level 3 (R3)
$
Resistance level 2 (R2)
$
Resistance level 1 (R1)
$
Pivot point (PP)
$
Support level 1 (S1)
$
Support level 2 (S2)
$
Support level 3 (S3)
$
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