Pivot Point Definition

Pivots Points are significant levels

Pivot Points were originally used by floor traders to set key levels.
Pivot Points offer chartists a methodology to determine price direction and then set support and resistance levels.
These levels would then be used to assist their trading throughout the day. 
  At the beginning of the trading day, floor traders would look at the previous day's high, low and close to calculate a Pivot Point for the current trading day. With this Pivot Point as the base, further calculations were used to set support 1, support 2, resistance 1 and resistance 2.
Once Pivot Points are set, they do not change and remain in play throughout the day. 



Money Zone, Floor Pivots and Camarilla Equations

 

 

 
Pivot Point Forumlas   

Standard Pivot Points

R3 = H + 2( Pivot - L
R2 = Pivot + ( H - L )
R1 = ( 2 x Pivot ) - L
Pivot = ( H + L + C ) / 3
S1 = ( 2 x Pivot ) - H
S2 = Pivot - ( H - L )
S3 = L - 2( H - Pivot )

Fibonacci's Pivot Points

R3 = Pivot + 1.000 * (H - L)
R2 = Pivot + 0.618 * (H - L)
R1 = Pivot + 0.382 * (H - L)
Pivot = ( H + L + C ) / 3
S1 = Pivot - 0.382 * (H - L)
S2 = Pivot - 0.618 * (H - L)

S3 = Pivot - 1.000 * (H - L)

Demark Pivot Points

If Close < Open Then x = H + 2 x L + C;
If Close > Open Then x = 2 x H + L + C;
If Close = Open Then x = H + L + 2 x C;
R1 = x / 2 - L

S1 = x / 2 - H

Camarilla Pivot Points

R4 = C + (H - L) * 1.1/2
R3 = C + (H - L) * 1.1/4
R2 = C + (H - L) * 1.1/6
R1 = C + (H - L) * 1.1/12
Pivot = ( H + L + C ) / 3
S1 = C - (H - L) * 1.1/12
S2 = C - (H - L) * 1.1/6
S3 = C - (H - L) * 1.1/4
S3 = C - (H - L) * 1.1/2

The Camarilla Equation produces 8 levels from yesterday's open, high, low and
close. These levels are split into two groups, numbered 1 to 4. The pattern
formed by the 8 levels is broadly symmetrical, and the most important levels are
the 'L3' and 'L4' levels. Traditionally, while day trading, traders look for the
market to reverse if it hits an 'L3' level. They would then open a position
AGAINST the trend, using (according to the 'classical' rules) the associated 'L4'
level as a stop loss. More modern theory suggests setting stoplosses that appear
to you the trader to be prudent, and to not even open the trade until it has
penetrated the level in the 'right' direction, i.e. demonstrated that it has found
resistance (or support). In the case of the higher L3 level, this would mean that
price had already reversed and pushed back down thru the level, heading south.
The second way to try day trading with the Camarilla Equation is to regard the
'L4' levels as 'breakout' levels - in other words to go WITH the trend if prices push
thru either L4 level. This essentially covers all the bases - Day Trading within the
L3 levels enables you to capture all the wrinkles that intraday market movement
throws up, and the L4 breakout plays allow the less experienced trader to
capitalise on relatively low risk sharp powerful movements. Here's what it looks
like in action:-

PIVOT POINTS and SDX-TzPivots indicator

Support and resistance levels are calculated using the following formulas:

Resistance:

R1 = Resistance Level 1 = (2*PP) - L
R2 = Resistance Level 2 = (PP-S1) + R1
R3 = Resistance Level 3 = (PP-S2) + R2

Support:

S1 = Support Level 1 = (2*PP)-H
S2 = Support Level 2 = PP - (R1 - S1)
S3 = Support Level 3 = PP - (R2-S2)

Full set of support-resistance levels in this system includes also the mid points between each of those levels:

MR1 = (P + R1)/2
MR2 = (R1 + R2)/2
MR3 = (R2 + R3)/2

MS1 = (P + S1)/2
MS2 = (S1 + S2)/2
MS3 = (S2 + S3)/2

Where:
H = previous trading day’s high
L = previous trading day’s low
C = previous trading day’s Close

There is also the popular modification of the traditional Pivot formulae:

Central Pivot Point (P) = ((Today's O) + Yesterday's (H + L + C)) / 4