Pivot points strategy
Pivot points turn yesterday's high, low and close into today's support and resistance. Trade bounces in ranges and breaks in trends.
Try Pivot points strategy on a real day
A real market day with the date hidden. Run the checklist on the chart, then buy, sell or stay out: the real candles answer.
Check every point of the list before you decide. Stay out if the setup is not there.
Pivot points come from floor traders in the futures pits, who needed quick reference levels for the day. Because so many traders still watch them, they often act as self-fulfilling support and resistance.
Why it works
The pivot P = (high + low + close) ÷ 3 of the previous day. R1 = 2P − low, S1 = 2P − high, R2 = P + (high − low) and S2 = P − (high − low).
Price above the pivot suggests buyers control the day; below it, sellers. The R and S levels are where intraday moves often pause.
The rules
Setup
- Calculate the levels from the previous day.
- Note whether today opened above or below P.
Entry
- Range day: buy a rejection at S1 with price still near P; sell a rejection at R1.
- Trend day: buy the break and retest of R1 when price opened above P.
Stop loss
- Beyond the level being traded by about a quarter of the distance to the next level.
Exit and management
- Target the next pivot level.
Filters that improve it
- Use 15-minute or 5-minute candles for timing.
- Skip levels that sit within 10 pips of each other.
Worked example
Illustrative EUR/USD example: yesterday H 1.0900, L 1.0820, C 1.0880. P = 1.0867, R1 = 1.0913, S1 = 1.0833. Price opens at 1.0875 and dips to 1.0835, where a hammer forms. Buy at 1.0840, stop 1.0825, target P at 1.0867.
Illustrative numbers, not a recommendation.
Common mistakes
- Trading every level on every day without a context.
- Mixing different pivot formulas.
How to practise it
In Candlemind calculate the pivots from the previous day before the session, draw them as horizontal lines and write them in your notes.
Pre-trade checklist
- Levels calculated from the previous day
- Open above or below P noted
- Clear reaction at the level
- Stop beyond the level
- Target the next level
Frequently asked questions
How do you calculate pivot points?
P = (H + L + C) ÷ 3; R1 = 2P − L; S1 = 2P − H; R2 = P + (H − L); S2 = P − (H − L).
Do pivot points work in forex?
Many forex traders use daily pivots, calculated from the New York close.