Pivot Points , or simply pivots, establish areas of support and resistance by examining the high, low, and closing prices of an asset.
They are useful for identifying trading ranges, trend reversals, and market sentiment.
In practice, there are many ways to calculate the pivot point.
A popular approach is to first take a simple average of the periodic high, low, and closing prices and then apply this to the periodic trading range.
The pivot value is calculated using the following formula:
Pivot = (High + Low + Close) / 3
After exporting the pivot, use it to develop four support and resistance levels:
Resistance 1 = (Pivot * 2) - Low Resistance 2 = Pivot + (High - Low) Support 1 = (Pivot * 2) - High Support 2 = Pivot - (High - Low)
Pivot points are used in a variety of ways, primarily to indicate the existence of a trending or range-bound market.
The general rule is that a bullish trend occurs when price is above resistance.
If the price is below the support level, a bearish trend exists.
If the price falls between support and resistance levels, it means there is a range limit condition.
Pivot points are a straightforward way to quickly establish a set of support and resistance levels.
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