Trading Educators Blog
I have never been a pivot point trader per se. Pivot Points are those price levels that are most likely to act as levels of so-called support and resistance on any given trading day. As we already know, anything that most people use is liable to work. This is the only reason that theories like Fibonacci trading or Elliott waves appear to be more than just theory. For the same reason, the most influential pivot points are those that are used by majority of traders. The most widely used formula for calculating pivot points is as follows:
H = previous day's high
L = previous day's low
C = previous day's close
Pivot Point = (H + L + C)/3
Resistance = 2*PP - L
Support = 2*PP - H
Previous day's last two hour high = L2HrHigh
Previous day's last two hour low = L2HrLow
When the price moves through the known pivot point on increased volume it is most likely to continue current trend, and if the price hits the known pivot point but is unable to move through it is most likely to reverse the current trend.
In case you are hungry for formulas, here is another one for calculating pivot points.
Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)
I cannot vouch for the efficacy of either of these formulas.