what is pivot point in trading

Pivot point is a support/resistance level that guides your trading decision. You can calculate the pivot point price manually or get an indicator to insert the pivot point on your chart for you. For me I prefer to do the calculation myself early in the morning before the London session opens.

To calculate pivot point manually, switch to the 1-hour time frame on your chart then get the readings for:

1. Yesterday's Highest Price (YHP)

2. Yesterday's Lowest Price (YLP)

3.Yesterday's closing price (YCP)

Pivot Point = (YHP + YLP + YCP)/3

After you calculate the pivot point figure, go to your charts and draw a horizontal line at that price. The line will serve as support/resistance. When you are contemplating on where to place your take profit and stop loss, you can place them around the pivot point.

To add to what @Arthur said, Pivot Points are effective in trading, but they do not work all the time, they only serve as guides. Sometimes price does not respect the pivot point. It is better to mark out your pivot points every day just in case.

A pivot point (PP) is a calculated price level that acts as the central reference for the day.

From it, several support (S1, S2, S3) and resistance (R1, R2, R3) levels are derived.

It helps traders answer:

“Where might the price reverse today?”

“Where could support or resistance hold?”