Pivot

Points are also know as

Floor Trader Pivots (or Pivots or Floor Pivots or Session Pivots). These are the places where traders expect

support and resistance to occur in the market and as such are used as entry and exit points for

trades.

Depending on the type of pivot formula used you can generally generate and use up to 9 levels. These levels are marked and calculated by starting with a center pivot called a Pivot Point and labeled as PP. From that point, moving up, the

resistance levels are numbered sequentially as R1, R2, R3, R4 with R4 being the highest value. The support levels are numbered in the same way S1, S2, S3, S4 with S4 being the lowest support value.

A trader needs to decide if they will calculate their Pivots based on

ETH or

RTH, the later could be argued to match more closely the time period used by

floor traders (who developed Floor Trader Pivots before the advent of computers) and may therefore be more representative of those still calculating pivots. However it needs to be remembered that from 2015 there are basically (with one exception) no

floor trading pits anymore when it comes to futures trading.

Nowdays with computers

VWAP and Volume Profiling (

VPOC,

VAH and

VAL etc) are arguably a better way to calculate and look at typical/average price.

There are a number of ways to calculate pivots points. Here are some of the more popular methods: Classic Pivot Points, Camarilla Pivot Points, DeMark Pivot Points, Woodie Pivot Points.

The formula used in the calculation of Classic Pivot Points are:

R4 = R3 +

RANGE (same as: PP + RANGE * 3)

R3 = R2 + RANGE (same as: PP + RANGE * 2)

R2 = PP + RANGE

R1 = (2 * PP) - LOW

PP = (HIGH + LOW + CLOSE) / 3

S1 = (2 * PP) - HIGH

S2 = PP - RANGE

S3 = S2 - RANGE (same as: PP - RANGE * 2)

S4 = S3 - RANGE (same as: PP - RANGE * 3)

Where R1 through R4 are Resistance levels 1 to 4, PP is the Pivot Point, S1 through S4 are support levels 1 to 4, RANGE is the High minus the Low for the given time frame (usually daily).

The formula used in the calculation of Camarilla Pivot Points are:

R4 = C + RANGE * 1.1/2

R3 = C + RANGE * 1.1/4

R2 = C + RANGE * 1.1/6

R1 = C + RANGE * 1.1/12

PP = (HIGH + LOW + CLOSE) / 3

S1 = C - RANGE * 1.1/12

S2 = C - RANGE * 1.1/6

S3 = C - RANGE * 1.1/4

S4 = C - RANGE * 1.1/2

Where R1 through R4 are Resistance levels 1 to 4, PP is the Pivot Point, S1 through S4 are support levels 1 to 4, RANGE is the High minus the Low for the given time frame (usually daily). C stands for the Closing price.

The formula used in the calculation of Woodie Pivot Points are:

R4 = R3 + RANGE

R3 = H + 2 * (PP - L) (same as: R1 + RANGE)

R2 = PP + RANGE

R1 = (2 * PP) - LOW

PP = (HIGH + LOW + (TODAY'S OPEN * 2)) / 4

S1 = (2 * PP) - HIGH

S2 = PP - RANGE

S3 = L - 2 * (H - PP) (same as: S1 - RANGE)

S4 = S3 - RANGE

Where R1 through R4 are Resistance levels 1 to 4, PP is the Pivot Point, S1 through S4 are support levels 1 to 4, RANGE is the High minus the Low for the given time frame (usually daily).

One of the key differences in calculating Woodie's Pivot Point to other pivot points is that the current session's open price is used in the PP formula with the previous session's high and low. At the time-of-day that we calculate the pivot points on this site in our Daily Notes we do not have the opening price so we use the Classic formula for the Pivot Point and vary the R3 and R4 formula as per Woodie's formulas.

[significant sections sourced from:

http://www.mypivots.com/dictionary/d.../pivot-points]