What Are Pivot Points? (Hint: They Represent Key Support and Resistance Levels)
Pivot points are pre-calculated support and resistance levels used by many traders to indicate high probability
reversal or retracement points for intraday price movement in a stock. Pivot points are often reversal levels in a
trending price graph, they can be used to pre-plan trade entries and take advantage of market reversals for profit.
For example, in an up-trending bullish stock chart, the R1 will likely represent a retracement point, while the R2
level (if reached) has a high probability of being the price high for the day. Day traders can use pivot points to
their benefit and go against or “fade” a trend at key pivot levels, taking advantage of the high probability for
reversal or retracement. Every single stock, index, and future has daily, weekly, and even monthly pivot points. For
those who are aware of their existence and know how to use these pivot points properly, the profit potentials can
"In The Stock Market Jungle
We Give You A Predator's Edge"
H = High of the day, week, or month.
L = Low of the day, week, or month.
C = Closing price of yesterday, last week, or last month.
How Do We Calculate Pivot Points?
Pivot points are calculated using several methods, the most common one being taking the average of the previous
day’s, week’s, or month’s (depending on which time frame you want pivots for) highs, lows, and closing price. This
calculation is explained below:
How To Day Trade With Pivot Points.
The pivot point itself (P) represents the highest level of resistance or support, depending on the overall market
condition. The support and resistance levels that are calculated with R1-3 and S1-3 are typically used as exit points
for swing trades but can also be used an extremely good entry points for day trades (initiating trades opposite of the
trend). Typically, we will see R1 and S1 levels hit on most charts every day, these levels signify key retracement or
reversal points in price action and can be used as entry points to fade the trend. For the patient day trader, the R2
and S2 levels increase the probability of a trend reversal and retracement drastically, however because of their
distance from the P, price action tests these levels much less frequently than it does the R1 and S1. If you are
patient enough to wait for price action to reach a R2 or S2 level, that will typically be the respective high or low of
the day and is an extremely profitable trade opportunity.
As mentioned above, there are Daily, Weekly, and Monthly pivot points. The Weekly pivots give a higher
probability of reversal than the daily ones do, while the monthly pivots represent major price reversals. Typically,
weekly pivot points are used in day trading, as they must only be calculated once a week (versus daily), and they
pose a higher probability of reversal than daily pivot point do. To see some pivot point trade setups click below.
Market Prowler Members
Market Prowler calculates the weekly pivot points of over 30 commonly day-traded stocks, commodities, and
indexes, and publishes these in our weekly newsletter for members. Market Prowler members who day trade can use
the Pivot Point calculations that we provide as a quick reference when initiating profitable trades.
Market Prowler members trade a vast variety of different stocks and indexes, so if there is a symbol that you find
yourself commonly trading but it doesn’t appear in our Newsletter, please follow the “Request A Symbol” link in the
Member’s Area. If a certain stock receives enough member requests we will add it to the pivot points section of the
Market Prowler newsletter.
To learn more about Pivot Point trades, visit our resources page and click on the link to John Carter’s book,
Mastering The Trade.
The Intelligent Trader
To learn more about basic and advanced uses of Pivot Points
both this trade setup and many more in depth. This book takes
readers from the beginer level all the way up to the professional
technical analyst level step by step with easy to follow lessons