Pivot Points

Used for decades by floor traders. Classic formula:

PP = (High + Low + Close) / 3
R1 = 2*PP - Low      | S1 = 2*PP - High
R2 = PP + (High-Low) | S2 = PP - (High-Low)
R3 = High + 2*(PP-Low) | S3 = Low - 2*(High-PP)

Why they work (partly)

Self-fulfilling: lots of pro traders and algos use the same pivot levels, making them real action zones.

Reading

• Price above PP = bullish bias for the session
• Price below PP = bearish
• R1/R2/R3 = graduated resistances
• S1/S2/S3 = graduated supports
• R2/S2 break with volume = strong directional momentum

Variants

• Camarilla: tighter levels, intraday
• Fibonacci: uses Fibo ratios (.382, .618) instead of simple multiples
• Woodie's: weights the close more

Application

Mostly day trading and short swing. Daily pivots for intraday, weekly for swing, monthly for longer positions.