Pivot points
Price levels calculated from the previous period’s high, low and close, which many short-term traders watch as possible support and resistance.
What pivot points are.
Five horizontal levels, worked out before the period starts and fixed until it ends.
Pivot points turn the previous period’s high, low and close into a set of horizontal levels. The middle one is the pivot, P.
Above it sit resistance levels R1 and R2. Below it sit support levels S1 and S2. Daily pivots, built from the previous day, are the most common.
The levels stay fixed for the whole period. Unlike a moving average, they do not change as new bars arrive.
How they are calculated.
Classic pivots use five formulas. The worked example uses a previous high of 104, low of 99 and close of 101.2.
Take the previous period’s numbers.
For daily pivots, use the previous day’s high, low and close. Weekly and monthly pivots use the previous week or month.
Work out the pivot.
Add the high, low and close together, then divide by three.
Work out the first levels.
R1 is twice the pivot minus the low. S1 is twice the pivot minus the high.
Work out the outer levels.
R2 is the pivot plus the high-low range. S2 is the pivot minus that range.
| Level | Formula | Worked example |
|---|---|---|
| R2 | P + (high − low) | 101.4 + 5 = 106.4 |
| R1 | (2 × P) − low | 202.8 − 99 = 103.8 |
| P | (high + low + close) ÷ 3 | 304.2 ÷ 3 = 101.4 |
| S1 | (2 × P) − high | 202.8 − 104 = 98.8 |
| S2 | P − (high − low) | 101.4 − 5 = 96.4 |
These are the classic, or floor, pivots. Other versions exist, such as Fibonacci, Woodie and Camarilla pivots, and each one gives different levels.
How to read them.
Four things traders look for. None of them is a signal on its own.
Above or below the pivot.
Many traders read price above P as a firmer tone for the period, and price below P as a weaker one.
Levels as possible turning points.
Some traders watch for a pause near R1 or S1, since many others watch the same levels. Price can also go straight through them.
Breaks through a level.
A clean move through R1 or S1 can carry on towards the next level. Many traders wait for a close beyond it first.
How far apart the levels sit.
A wide previous range spreads the levels far apart. A narrow range puts them close together, near the pivot.
Common mistakes.
Where traders new to pivot points most often go wrong.
Treating the levels as walls. Price can run through every level in a busy session, especially around news.
Ignoring the day boundary. The previous day’s high, low and close depend on the platform’s server time, so levels can differ between platforms.
Mixing formulas. Classic, Fibonacci, Woodie and Camarilla pivots give different levels, so know which one you are looking at.
Using daily pivots on long timeframes. On a daily or weekly chart, weekly or monthly pivots fit better.
Using them on MetaTrader 5.
Pivot points are not one of MT5’s built-in indicators. You can draw the levels yourself or add a custom indicator.
Find the previous period’s numbers.
Open a daily chart and the Data Window from the View menu. Hover over the previous day’s bar to read its high, low and close.
Work out the levels.
Use the formulas in the table above. A calculator or a spreadsheet is all you need.
Draw the lines.
Go to Insert, then Objects, then Lines, and choose Horizontal Line. Right-click a line and open its properties to type its exact price.
Or use a custom indicator.
In desktop MT5, open the Toolbox, choose the Code Base tab and download a pivot points indicator. It then appears in the Navigator under Indicators.
Questions, answered.
What traders ask most about pivot points.
01Who invented pivot points?
02Which timeframe should I use them on?
03Why do my levels differ from another platform’s?
04Do pivot points work on forex?
05Can I practise with them first?
Practise it on a demo.
Draw this week’s pivot levels on a free MT5 demo and watch how price behaves around them before you trade with real money.
Trading CFDs on a live account puts your capital at risk and you can lose money. A demo does not.