Pivot Point is a technical indicator derived by calculating the numerical average of a particular stock’s (or any other financial asset like forex pair or any future contract) high, low and closing prices.
Pivot Points have become very popular with day traders because of their ability to identify support and resistance based off of the prior days price action.
Mathematical Formula’s of Pivot Point –
P = (H + L + C) / 3.
Support and Resistance Levels :
R1 = P + (P − L) = 2×P − L
S1 = P − (H − P) = 2×P − H
R2 = P + (H − L)
S2 = P − (H − L)
R3 = H + 2×(P − L)
S3 = L − 2×(H − P)
P = Pivot Point
H = Previous Day’s High Price
L = Previous Day’s Low Price
C = Previous Day’s Closing Price
R1, R2, R3 = Resistance 1, 2, 3
S1, S2, S3 = Support 1, 2, 3