A pivot point is a significant price level in technical analysis of a financial market that traders utilise as a predicted signal of market movement. A pivot point is determined as the average of important prices (high, low, close) from the previous trading period. If the market trades above the pivot point in the next period, it is considered bullish, and trading below the pivot point is considered bearish.
Depending on the overall market condition, the pivot point itself indicates a level of maximum resistance or support. If the market is indecisive (undecided), prices may bounce significantly around this level until a price breakout occurs. Trading above or below the pivot point reflects market sentiment. It is a leading indicator that provides early warning of probable new market highs or lows within a specified time range.

The pivot point and preceding market width support and resistance levels can be utilised as exit points for trades, but they are rarely used as entry indications.

Pivot points are a popular technical analysis tool used by traders to identify potential support and resistance levels in the market. To use pivot points, first calculate the pivot point (P) using the formula: P = (High + Low + Close) / 3. Once the pivot point is determined, calculate support (S1, S2) and resistance (R1, R2) levels using the formulas: R1 = (2 × P) − Low, R2 = P + (High − Low), S1 = (2 × P) − High, and S2 = P − (High − Low). These levels help traders identify potential entry and exit points. If the price is above the pivot point, it indicates a bullish trend, and traders may look for buying opportunities near support levels. Conversely, if the price is below the pivot point, it suggests a bearish trend, and traders may consider selling near resistance levels. Always combine pivot points with other indicators for better accuracy.