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Pivot point definition
A pivot point is a support and resistance level calculated from the previous period's high, low, and close. Traders use it to gauge where price may turn or stall during the current session.
The main pivot is the average of the prior high, low, and close, and it acts as the central reference. When price trades above the pivot, the bias reads as more bullish; when it trades below, the bias reads as more bearish. Further support and resistance levels are then projected above and below the central pivot.
A pivot point is a fixed level for the session, recalculated from the previous period's data, unlike a moving average, which slides with every new price. It applies across forex, stocks, commodities, indices, futures, and CFD trading, and traders usually read it alongside price action, trendlines, or momentum indicators rather than on its own.
Pivot point Example
The previous day's high, low, and close for EUR/USD were 1.0900, 1.0800, and 1.0850.
You calculate the daily pivot point:
(1.0900 + 1.0800 + 1.0850) √∑ 3 = 1.0850
While EUR/USD trades above 1.0850, you look for bullish setups and treat lower levels as support. If it slips below 1.0850, you watch for bearish setups and treat higher levels as resistance.
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