In the 1960s when American Traders were operating the Chicago Stock Exchange, they noted that it was possible to make a prediction of where the price might go the next day. When the market closed, they took the high of that day + the low and + the closing and divided it by 3, and noticed that the next day the price was almost always looking for this value, they then called the Pivot Point, the most negotiated region. important part of the day. It started to become very popular among Tape Reading trades and they were discovering more important levels of supports and resistances. Since then, this technique has been used by professional trades all over the world. It is a technique that works very well in any market, be it FOREX or Stock Exchange.
Here is the formula for making this calculation:
PP (Pivott Point) = (previous high + previous low + previous close) / 3
With this we can calculate the other price levels, we can calculate possible supports (S) and resistances (R):
R1 = (2 x pivot) – Minimum
S1 = (2 x pivot) – Maximum
R2 = Pivot + (Res1 – Sup1)
S2 = Pivot – (Res1 – Sup1)
R3 = (2 x pivot) + (Maximum – 2 x Minimum)
S3 = (2 x pivot) – (2 x Maximum – Minimum)
Obviously there is no miracle technique and every technique has to know how to filter the entries, but with the pivot points, you can understand why the price stopped in a certain region. In Brazil it is very difficult to find this material, so we are here to help every type of trader, from the beginner to the one who has been struggling for years and who still cannot be consistent.
The pivot points work very well based on the Daily candle (D1), so the next day you can use any time frame below D1 and you will have the pivot points, the ideal is to use the M15.
It is also possible to find pivot points on the weekly, monthly, annual, or even scalpers on H4 and H1 for example.