Pivot points are one of the oldest tools in technical analysis — used by floor traders in the futures and equities markets long before retail forex trading existed. They are calculated from the previous session's high, low, and close prices and provide a set of objective, mathematically derived support and resistance levels for the current session. Their significance comes partly from their calculation and partly from their ubiquity — when tens of thousands of traders are watching the same levels, price tends to react at those levels because collective attention creates collective action.
What Are Pivot Points?
Standard pivot points give you seven levels for the trading day: a central pivot point (PP), three resistance levels above it (R1, R2, R3), and three support levels below it (S1, S2, S3). These levels are calculated before the market opens and remain fixed for the entire session — making them easier to plan around than dynamic indicators that change with every new candle.
The Standard Calculation
The calculation requires only three inputs: the previous period's high, low, and close.
Previous day: High (H): 1.0950 Low (L): 1.0870 Close (C): 1.0920 Pivot Point (PP): (H + L + C) ÷ 3 PP = (1.0950 + 1.0870 + 1.0920) ÷ 3 PP = 1.0913 R1 = (2 × PP) − L = 1.0957 R2 = PP + (H − L) = 1.0993 R3 = PP + 2(H − L) = 1.1073 S1 = (2 × PP) − H = 1.0877 S2 = PP − (H − L) = 1.0833 S3 = PP − 2(H − L) = 1.0753
You do not need to calculate these manually — use our free Pivot Point Calculator for instant results, or find a pivot point indicator for MT4 that draws the levels automatically on your chart.
Using R1, R2, R3 and S1, S2, S3
The central pivot point is the most important level — it acts as the session's primary reference. If price opens above the pivot and holds above it, the intraday bias is bullish. If price opens below the pivot and holds below it, the bias is bearish.
R1 and S1 are the first levels that price is most likely to test during a normal trading day. R2, R2, and S3 are reached only on more volatile or trending days. R3 and S3 are rarely reached in a single normal trading session — when they are, the market is experiencing unusually strong directional momentum.
Trading Pivot Points
Pivot points produce two primary trade setups: bounce trades and breakout trades. A bounce trade occurs when price approaches a pivot level and shows a reversal candlestick signal — a pin bar or engulfing candle — at the level. The entry is in the direction of the expected bounce, with a stop just beyond the level.
Scenario: Price falls toward S1 at 1.0877 during the London session. A bullish pin bar forms with the wick touching S1 precisely. Entry: Buy above pin bar high. Stop: Below pin bar low (below S1). Target: Pivot Point (PP) at 1.0913. Risk-Reward: approximately 1:2.
A breakout trade occurs when price breaks decisively through a pivot level with momentum. The prior resistance level — once broken — becomes the new support. A pullback to the broken level provides a high-probability breakout continuation entry.
Pivot Points on Different Timeframes
Daily pivot points are the most widely used and most significant — calculated from yesterday's OHLC and applied to today's session. Weekly pivot points are calculated from the previous week's OHLC and are significant for swing traders planning over multiple days. Monthly pivot points provide major structural levels and are useful for longer-term position traders.
Use our free Pivot Point Calculator to generate standard, Fibonacci, and Camarilla levels from any OHLC input. The next lesson covers the Fibonacci and Camarilla methods.