Definition of pivot in technical analysis

In technical analysis, a pivot refers to a significant price level on a chart that is used as a reference point for traders and analysts. Pivot points are commonly used in various trading strategies to determine potential support and resistance levels, make trading decisions, and set price targets. There are different types of pivot points, with the most widely used being the classical pivot points.

Here's a definition of a pivot in technical analysis:

Pivot Point: A pivot point is a specific price level calculated from the high, low, and closing prices of the previous trading session. It serves as a reference point to assess potential price movements in the current trading session. Pivot points are used to identify critical support and resistance levels, as well as to determine entry and exit points for trades.

The most common pivot points include:

1. Classic Pivot Points: These are calculated as follows:

   • Pivot Point (PP) = (High + Low + Close) / 3

   • Support 1 (S1) = 2 * PP - High

   • Support 2 (S2) = PP - (High - Low)

   • Support 3 (S3) = Low - 2 * (High - PP)

   • Resistance 1 (R1) = 2 * PP - Low

   • Resistance 2 (R2) = PP + (High - Low)

   • Resistance 3 (R3) = High + 2 * (PP - Low)

2. Fibonacci Pivot Points: These pivot points use Fibonacci ratios to determine support and resistance levels, often aligning with key Fibonacci retracement levels.

3. Woodie's Pivot Points: Woodie's pivot points use a different calculation method that gives more weight to the previous day's close price. They are often used in futures trading.

4. Camarilla Pivot Points: Camarilla pivot points provide a set of support and resistance levels based on a specific mathematical formula. They are mainly used by intraday traders.

Pivot points are particularly popular among day traders and short-term traders as they can help identify potential reversal and breakout levels. Traders often use them in conjunction with other technical indicators and analysis techniques to make trading decisions. The specific pivot point levels that are considered significant may vary from one trader to another and depend on market conditions.