Pivot Point Trading: Using Support & Resistance Levels to Decode Market Structure

Pivot point trading strategy helps traders understand how the market may move each day. It uses support and resistance levels to show where price might rise, pause, or fall. These levels are easy to follow and give a simple view of market structure.

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What Are Pivot Points?

Pivot points come from the previous day’s high, low and close. The main pivot point is the centre level. When the price moves above it, the market often turns bullish. When the price stays below it, the market usually leans bearish. This makes pivot points useful for quickly judging direction without using many tools.

How Pivot Points Are Calculated

Pivot points follow a standard five-point system, which is easy to understand:

Main Pivot Point (P):
P = (High + Low + Close)/3
This is the average of the previous day’s movement.

Support Levels:
S1 = (2 × P) − High
S2 = P − (High − Low)

Resistance Levels:
R1 = (2 × P) − Low
R2 = P + (High − Low)

These formulas simply place important levels above and below the central pivot point. They show where the price might slow down, bounce or reverse.

Support and Resistance Levels

Along with the main pivot, traders also watch S1, S2, R1 and R2. These levels act like steps on the chart. S1 and S2 show where prices may stop falling. R1 and R2 show where prices may struggle to move higher. Traders use these zones to plan entries instead of reacting late. This keeps the approach calm and steady.

How Traders Use Pivot Points

Many traders look at candles near pivot levels to spot clues. A bounce from the pivot may show buyers are active. A strong close below it may hint that sellers are in control. These simple signals help traders make choices with more confidence.

Trading With the Trend

Pivot point trading works well when combined with the trend. In an uptrend, buying near S1 or S2 often gives better setups. In a downtrend, selling near R1 or R2 helps keep trades aligned with momentum. This balanced approach supports cleaner decision-making.

Why Pivot Points Matter

Pivot points make the market easier to read. They cut noise and give clear levels to watch. This helps traders improve timing and stay organised. The method is simple, practical and fits well for beginners learning market structure.