Pivot Points: A Decades-Old Formula Still Watched by Thousands of Traders

Pivot points are levels calculated from the previous day's high, low and close: the main pivot (P) plus supports S1–S3 and resistances R1–R3. Their strength isn't the formula but the fact that they're widely watched and identical for everyone.

What it is

The standard pivot is the average of the high, low and close. Further levels are created by adding and subtracting the range. There are Woodie, Camarilla and Fibonacci versions, which give different numbers.

Pivots date back to the trading-floor days, when traders calculated the levels by hand before the session.

How people use it

reactions at P, S1 and R1 during the day
the pivot as a direction filter: price above P means buyers have the upper hand
targets at the successive levels

What the research and evidence say

Research on orders in the currency market (Osler, 2003) showed that take-profit orders cluster at round numbers and stop orders just beyond them. A similar mechanism may work at popular levels such as pivots and explain some of the reactions. But there's no evidence that the formula itself has predictive power, and the many versions mean you can always find “the one that worked”.

Weaknesses

several versions of the formula give different levels
the close depends on which session counts as the day (24 hours or the regular session)
seven levels a day increases the chance of a random reaction
no volume information

What order flow shows

A pivot is calculated from three numbers from yesterday. Yesterday's volume profile tells you more: where the point of control was (the price with the most volume), where the value area was, which extremes were weak. These are also levels derived from the previous session, but based on where trading actually took place, not just on three prices.

Indicators vs order flow

Every indicator and every pattern in this section is built from the same data: a candle's open, high, low, close and sometimes volume. They're derivatives of price, showing the effect rather than the cause. Order flow looks at what price is made of: who was buying and selling aggressively (delta), where limit orders were waiting (the order book) and at which prices the market accepted trade (the volume profile).

On CME futures this data is real and comes from one central market. Spot forex doesn't have it: platforms show tick volume, the number of price changes at a single provider.

To be fair: order flow isn't the Holy Grail. It takes learning, it can be noisy, big players hide some of their orders, and an edge only comes from a process and risk control. But it gives you information that simply isn't on a candlestick chart.

How to use it sensibly

pick one version of pivots and one definition of the day
don't assume every level will work
compare pivots with levels from the previous session's profile

Glossary: Pivot points
Glossary: POC (Point of Control)
Glossary: Value area (VA, VAH, VAL)
Glossary: Poor high and poor low
Atlas of biases: The Texas sharpshooter fallacy
Order flow: Volume profile: how to read the POC, value area, HVNs and LVNs
Also under the microscope: Fibonacci retracements
Also under the microscope: Trend lines
Also under the microscope: Support and resistance

This is the session volume profile with VWAP in the Hetman Terminal (Battle Map of the Day). Screenshot from the Hetman Index (IHA) – a training instrument, simulated data. See all the Hetman Terminal tools →

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Frequently asked questions

How are pivot points calculated?

Pivot P is the average of the previous day's high, low and close. The S and R levels come from adding or subtracting the day's range from P.

Which pivot points are best?

There's no evidence that any one version is better. What matters is consistency and whether you see real activity at the level.

Educational content, not investment advice. No signals, entries, stops or position sizes.