Pivot-Points Fundamentals


Posted by: Invos Research
Published on: January 11, 2023
Pivot-Points Fundamentals

Pivot points are a type of technical analysis indicator commonly used in trading to identify potential levels of support and resistance. There are several different methods for calculating pivot points, but the most common are:

  1. Standard Pivot Points: Standard pivot points are calculated using the previous day's high, low, and close prices. This method uses a simple formula to calculate a central pivot point (P), and two levels of support (S1 and S2) and resistance (R1 and R2) on either side of the pivot point.
  2. Fibonacci Pivot Points: Fibonacci pivot points are similar to standard pivot points, but they use Fibonacci ratios to calculate the levels of support and resistance. This method calculates pivot points based on the Fibonacci sequence, and typically uses the previous day's high, low, and close prices.
  3. Camarilla Pivot Points: Camarilla pivot points are a more recent development, it's similar to standard pivot points but with an additional set of support and resistance levels (S3, S4, R3, R4) this method provides a greater number of potential levels of support and resistance. The calculation is based on the previous day's high, low, and close prices.
  4. DeMark's Pivot Points: DeMark's pivot points are a proprietary method that was developed by Tom DeMark and are considered a more advanced form of pivot point analysis. This method calculates pivot points differently than traditional pivot point methods, and it's more useful in the short term.

These are the most common pivot point methods, but there are other pivot point calculation methods that traders may use. It's important to keep in mind that pivot points are just one of many tools that traders use to analyze market trends and identify potential trading opportunities, and it's always advisable to use them in combination with other technical indicators and market analysis for a more comprehensive understanding of the market.