Pivot Points (classic)

The idea in plain words

Floor traders needed levels before the market opened. Yesterday's range gives a central "pivot" and levels above (resistance R1–R3) and below (support S1–S3) where today's price often reacts.

How it is calculated

Uses the previous day for intraday charts, the previous month for daily charts and the previous year for weekly and monthly charts.

P = (high + low + close) ÷ 3
R1 = 2P − low,  S1 = 2P − high
R2 = P + (high − low),  S2 = P − (high − low)
R3 = high + 2 × (P − low),  S3 = low − 2 × (high − P)

How to use it

• Price above P: bullish bias for the day; below: bearish.
• R1/S1 are common targets and turning points; R2/S2 for bigger days.

Drawing conclusions

• Levels are more meaningful when they line up with other support or resistance.

Watch out for

• Widely watched levels can be briefly overshot as stops are triggered.

A little history

Used by floor traders on exchange trading floors long before electronic trading.