Pivot points are price levels calculated from the previous session's high, low and close. Because the formula is public and simple, thousands of traders watch the same levels, which is exactly why price often reacts around them.
The formula
Take the high (H), low (L) and close (C) of the previous completed session:
PP = (H + L + C) / 3 R1 = 2 × PP − L S1 = 2 × PP − H R2 = PP + (H − L) S2 = PP − (H − L)
PP is the central pivot. R1 and R2 are resistance levels above it, S1 and S2 are support levels below it.
A worked example
Say yesterday gold made a high of 4,240, a low of 4,180 and closed at 4,220.
| Level | Calculation | Result |
|---|---|---|
| PP | (4,240 + 4,180 + 4,220) / 3 | 4,213.3 |
| R1 | 2 × 4,213.3 − 4,180 | 4,246.7 |
| S1 | 2 × 4,213.3 − 4,240 | 4,186.7 |
| R2 | 4,213.3 + (4,240 − 4,180) | 4,273.3 |
| S2 | 4,213.3 − (4,240 − 4,180) | 4,153.3 |
How traders read them
- Above PP, buyers have the upper hand for the session. Below PP, sellers do.
- R1 and S1 are the first places where price often pauses or reverses.
- A level that breaks and then holds on a retest often flips its role: broken resistance can become support.
- R2 and S2 are reached on stronger days, often driven by news.
Zones, not lines. Treat each level as a small zone of a few dollars. Price rarely turns at the exact decimal, and different brokers calculate the day from different server times, so their levels differ slightly.
Common mistakes
- Buying or selling every touch of a level without waiting for confirmation.
- Ignoring high-impact news (CPI, NFP, FOMC), which can run straight through every level.
- Using pivots against a clear trend instead of with it.
Key takeaways
- Pivots are calculated, not guessed, so everyone sees the same map.
- PP sets the bias; R1/S1 are the first reaction zones.
- Wait for price to react at a level before acting on it.