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Pivot Points

Pre-Calculated Levels for Intraday Support & Resistance

Pivot Points are one of the oldest and most effective tools for intraday traders.
Originally used by floor traders before digital charting existed, pivot points still play a major role in modern markets because they provide pre-calculated support and resistance levels before the trading day even begins.

 

Pivot Points give traders a framework for planning entries, exits, targets, and stops, while also revealing intraday trend direction.

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What Are Pivot Points?

A Pivot Point (P) is a price level calculated from the previous day’s high, low, and close.
From this central point, traders derive additional levels:

  • R1 / R2 → Resistance levels

  • S1 / S2 → Support levels

These levels form a set of static horizontal lines on a chart that remain unchanged throughout the trading day.

 

Pivot Point Formula

     P = (High + Low + Close) / 3

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Support & Resistance Levels

     R1 = (P × 2) – Low S1 = (P × 2) – High R2 = P + (High – Low) S2 = P – (High – Low)

 

This gives traders five core levels:

  • S2

  • S1

  • P (Pivot Point)

  • R1

  • R2

Some advanced traders use extended levels (up to S5/R5), but most intraday strategies focus on the first 5.

 

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How Pivot Points Work in Real Time

Pivot Points automatically act as either support or resistance depending on where price is relative to the level.

  • If price is above a pivot level, that pivot acts as support

  • If price is below a pivot level, that pivot acts as resistance

This holds true regardless of whether the level is labeled “R1,” “S1,” etc.

 

This dynamic relationship makes pivot points incredibly useful for:

  • Breakouts

  • Reversals

  • Trend confirmation

  • Target selection

  • Stop-loss placement

 

Why Pivot Points Are So Powerful

Pre-Calculated Levels

You know the major price levels before the market opens.
This helps traders plan trades, set alerts, and avoid emotional decisions.

 

Widely Used by Traders & Algorithms

Because pivot points are so common, they often become self-fulfilling levels.
Institutions, day traders, and algorithms all watch these zones.

 

Fast, Simple Trend Gauge

  • Trading above P = intraday uptrend

  • Trading below P = intraday downtrend

The pivot point itself (P) is often the most reactive level during the day.

 

Excellent for Targets & Stops

  • Break above R1 → next target is R2

  • Break below S1 → next target is S2

  • Stop-loss placement becomes structured and logical

 

Fortified Pivot Point Levels

Pivot Points become especially strong when they overlap with other technical levels:

  • 20 / 50 / 200 EMA

  • VWAP

  • Previous highs or lows

  • Fibonacci retracements (especially .382, .618)

  • Psychological price levels

 

When two or more levels overlap, the zone becomes a fortified pivot, meaning:

  • Bigger reaction

  • Stronger bounce or rejection

  • More reliable target

These fortified zones often produce high-probability intraday setups.

 

How to Use Pivot Points for Trading

1. Identify Trend Using the Pivot (P)

  • Price above P → bullish bias

  • Price below P → bearish bias

 

2. Watch for Reactions at S1/R1

These are the first “key levels” that typically see strong

candles.

 

3. Use the Levels as Targets

Examples:

  • Long breakout above R1 → target R2

  • Short breakdown below S1 → target S2

 

4. Combine with EMA or Momentum

Pivot Points work best when paired with:

  • 9 EMA

  • 20 EMA

  • MACD

  • RSI

  • VWAP

This helps confirm trend strength and filter out fake moves.

 

Limitations of Pivot Points

  • Pivot Points reset daily → mainly useful for intraday trading

  • Not ideal for swing or long-term charts

  • Must be combined with volume and trend indicators

  • Price may overshoot levels slightly before reacting

While limitations exist, Pivot Points remain one of the most reliable tools for planning intraday trades ahead of time.

 

Key Takeaways

  • Pivot Points use previous day’s range to calculate today’s levels

  • S1/S2 and R1/R2 act as support/resistance

  • Price above pivot = bullish; price below pivot = bearish

  • Perfect for planning targets and stop-loss placement

  • Strongest when layered with other technical levels

  • Ideal for day traders and momentum strategies

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Pro Tips

  • The main pivot (P) is the most reactive level—watch it closely at open.

  • Above P = bullish bias; below P = bearish — simple and extremely effective.

  • R1 and S1 are the best levels for first reactions—expect bounces or rejections.

  • Pivot + EMA + previous high/low = fortified pivot → strongest reaction zones.

  • Look for pivot rejections on weak volume for clean short opportunities.

  • Use pivots to pre-plan your day: targets, stops, and levels are set before market open.

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