Pivot Point

A Pivot Point is a technical indicator derived from the previous period’s high, low, and close prices, used to identify potential support and resistance levels for the current trading session.

How It Works

The core formula calculates the pivot point (PP) as the average of the prior session’s high (H), low (L), and close (C):

• PP = (H + L + C) / 3

From PP, traders derive additional levels:

• First resistance (R1) = (2 × PP) – L
• First support (S1) = (2 × PP) – H
• Second resistance (R2) = PP + (H – L)
• Second support (S2) = PP – (H – L)
• Third resistance (R3) = H + 2 × (PP – L)
• Third support (S3) = L – 2 × (H – PP)

These levels are plotted on the chart and act as reference zones where price may pause, reverse, or accelerate. Most trading platforms, including MetaTrader 5, provide built‑in pivot‑point calculators that automatically update each session.

Why It Matters for Traders

Pivot points offer a simple, objective framework for intraday decision‑making.

• They highlight areas where buying or selling pressure may converge, helping traders set entry and stop‑loss orders.
• Because the levels are based on widely watched historical data, they often attract market attention, increasing the likelihood of price reactions.
• Traders combine pivot points with other tools—such as moving averages or candlestick patterns—to filter false signals and improve trade timing.
• For brokers like STB, offering pivot‑point analysis supports clients who rely on technical strategies across forex, commodities, and indices.

Example

Assume the previous trading day for EUR/USD recorded:

• High (H) = 1.2350
• Low (L) = 1.2200
• Close (C) = 1.2300

Calculate the pivot point:

• PP = (1.2350 + 1.2200 + 1.2300) / 3 = 1.2283

Derive the first support and resistance:

• R1 = (2 × 1.2283) – 1.2200 = 1.2366
• S1 = (2 × 1.2283) – 1.2350 = 1.2216

Second level:

• R2 = 1.2283 + (1.2350 – 1.2200) = 1.2433
• S2 = 1.2283 – (1.2350 – 1.2200) = 1.2133

A trader might watch for a bounce near S1 (1.2216) as a potential long entry, with a stop just below S2 (1.2133) and a target toward R1 (1.2366).

Key Takeaways

• The pivot point is the average of the prior high, low, and close, forming a central reference for the session.
• Support and resistance levels derived from the pivot point help identify possible price reaction zones.
• Pivot points are widely used on platforms such as MetaTrader 5 and are useful for setting entries, stops, and profit targets.
• Combining pivot points with other technical analysis tools increases reliability and reduces false signals.