What it means
Pivot points are intraday support/resistance levels calculated from the prior session's high, low, and close. Standard formulas: PP = (H+L+C)/3 (central pivot); R1 = 2×PP - L (first resistance); S1 = 2×PP - H (first support); R2 = PP + (H-L); S2 = PP - (H-L); R3 and S3 extend further. Computed at session open and held constant throughout the session — provides fixed reference levels.
Why it matters
Pivot points are the canonical intraday reference levels for futures traders (S&P, gold, oil) and FX traders. Used by institutional desks for centuries (originally hand-calculated by pit traders). Major reaction zones — price tends to react at pivot levels even without other technical setups. Round-number combinations of pivots and historic prices produce major confluence levels.
How to use it
Plot daily pivots before session open. Use PP as central bias indicator (above = bullish, below = bearish). Trade reactions at R1/S1 (most reliable) and R2/S2 (lower frequency but higher conviction). R3/S3 mark extreme-move zones; reached only in trending sessions.
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