Pivot points are calculated using a specific formula that takes into account the previous day's high, low, and closing prices. These points are widely used in technical analysis to determine potential support and resistance levels for a given trading day.

To calculate pivot points, the first step is to find the pivot or central point, which is the average of the previous day's high, low, and closing prices. Once the pivot point is determined, support and resistance levels are calculated by using a specific formula.

The first level of support and resistance is calculated by subtracting and adding the previous day's high and low prices from the pivot point, respectively. These levels are considered the most significant support and resistance areas.

Additional support and resistance levels can be calculated by applying the same formula to the pivot point. These levels provide traders with a range of potential price targets or areas to watch for a potential change in market direction.

Overall, pivot points offer a valuable tool for traders to identify key price levels and make informed decisions based on potential support and resistance areas in the financial markets.