PIVOT POINT Formula

 

Pivot point theory:

This is an effective intraday trading formula. It anticipates the movement of a stock based on its performance on the previous day. A rundown of the previous day’s trading data of a stock will give us inputs like intraday high (H), intraday low (L), and closing price (C).

We need to add them up as:

H + L + C = X

Now, the derived value must be divided by 3:

X/3 = P (which is called the pivot point)

Then, multiply P with 2:

X/3 X 2 = Y

It is assumed that a stock moving above the pivot point is likely to continue its journey till the first resistance level. In some cases, it will move to the next resistance level.

Likewise, a stock trading below the pivot point is likely to drift lower to the first support level and continue to the second support level.

First resistance level (R1) = Y – L

Second resistance level (R2) = P + (H – L)

Similarly, we can also calculate the support levels as:

First support level (S1) = Y – H

Second support level (S2) = P – (H – L)