Trading term
What is Pivot point?
A pivot point is a calculated price level, based on the previous period's high, low and close, that traders use to gauge intraday direction. Around it sit support and resistance levels (S1, R1, and so on). Price above the pivot is read as bullish for the day; below it, bearish.
The pivot point (P) is a simple average of the prior day's high, low and close. From it, a formula projects several support levels (S1, S2, S3) below and resistance levels (R1, R2, R3) above. Together they map a grid of likely intraday turning points for the coming session — levels where price may stall, bounce, or break. Because the calculation is fixed and objective, every trader using the method sees the exact same levels, which helps them work.
Pivot points are a favourite of day traders. The central pivot acts as the day's dividing line — trading above it leans bullish, below it bearish — while R1/S1 are the first places to expect a reaction. A break through R1 or S1 suggests a trending day; repeated rejections there suggest a range. Like all such levels they're guides, not guarantees, and work best combined with price action and volume.
A central pivot (P) with resistance (R1, R2) above and support (S1, S2) below, all calculated from the prior day's high, low and close. Price reacts around them.
For example
Using yesterday's high, low and close, a stock's pivot computes to $50, with R1 at $52 and S1 at $48. It opens at $50.50 (above the pivot — mildly bullish), rallies to $52, stalls at R1, and pulls back.
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Explore Premium →Why it matters to you
Pivot points give day traders a ready-made, objective map of the session's likely support and resistance before the market even opens — no drawing required. Because the levels are calculated the same way by everyone watching, they become self-reinforcing intraday reference points for entries, targets and stops.
⚠ They're guides, not guarantees
Treating pivot levels as precise walls where price must reverse is the trap. They're probabilities — price often overshoots, wicks through, or ignores them entirely, especially on high-news days. Use them as reference zones to watch alongside price action, not as mechanical buy-and-sell lines.