Pivot Point Trading

A pivot point is a technical level calculated from the prior period's high, low, and close. PP = (H+L+C)/3. Additional support (S1, S2, S3) and resistance (R1, R2, R3) levels are calculated from this central pivot.

Pivots work because many traders watch the same mathematically-derived levels, creating self-fulfilling support and resistance. They're objective (same for everyone), easy to calculate, and used by professionals.

Standard pivots are most popular and widely used. Fibonacci pivots are good for Fibonacci traders. Camarilla pivots are best for scalping with tighter levels. Start with standard.

Wait for price to approach a pivot level. Look for a reversal signal (hammer at support, shooting star at resistance). Enter in the reversal direction with stop beyond the level and target at the next pivot.

No. While bounces occur ~60% of time at first touch, levels can break. Watch for breakout signs: strong momentum, multiple prior tests, news catalyst. Trade the break if it occurs.

Camarilla uses multipliers of the prior day's range (1.1/12, 1.1/6, 1.1/4, 1.1/2) from the close. Creates 8 tighter levels. S3/R3 are primary reversal zones. S4/R4 breaks signal trend days.

Calculate daily (intraday trading), weekly (swing), and monthly (position). Where multiple timeframe pivots align, you have confluence - much stronger levels. Prioritize trading at confluence zones.

CPR is the zone between PP and half of (PP+R1) above and (PP+S1) below. Narrow CPR after a tight prior day range suggests trend day potential. Wide CPR suggests range day.

Open above PP = Bullish bias (~60% of such days are up). Open below PP = Bearish bias (~60% down). This helps determine whether to focus on longs or shorts for the session.

When multiple levels align: Standard R1 = Fibonacci R1 = 50 SMA = prior swing high. More factors at same price = Stronger level. Score confluence and prioritize highest-scoring setups.

At support pivot: Look for absorption (bids refreshing), positive delta, slowing tape. These confirm level holding. At resistance: absorption (offers refreshing), negative delta, slowing tape. Enter only when flow confirms.

PP: 95%+ reached. S1/R1: 70-80%. S2/R2: 40-50%. S3/R3: 15-25%. Bounce rates: First touch ~60-65%, second ~55%, third ~45% (often breaks). Use statistics to size positions.

Backtest 2+ years: Test buffer (5-15 pts), pivot type, confirmation requirements. Use walk-forward testing to avoid overfitting. Typical optimal: 5-10 pt buffer, standard pivots, candle confirmation.

Scale in at multiple pivot supports (50% at S1, add 30% at S2). Scale out at pivot targets (50% at PP, 30% at R1, trail 20%). Trail stop to each pivot as price advances.

Avoid when: Major news event (levels may not hold), very low volume (less reliable), strong trend already (don't fade), or order flow conflicts with pivot signal.