Pivot Points are commonly used by traders as potential support and resistance levels. They create multiple Resistance levels labeled R1, R2, and R3 where R3 is the highest level. The Pivot Point is the central most level. The support levels are labeled S1, S2, and S3 where S3 is the lowest level. There are multiple variations of pivot points, at InvestiQuant, we use the most common definition. The calculations for the pivot points are defined below. It is important to know we are using regular trading hours data to calculate the pivot points.
Resistance 3 (R3) = Prior Session High + (2 * (Pivot Point- Prior Session Low))
Resistance 2 (R2) = Pivot Point+ (R1 - S1)
Resistance (R1) = (2 * Pivot Point) - Prior Session Low
Pivot Point (PP) = (Prior Session High + Prior Session Low + Prior Session Close) / 3
Support 1 (S1) = (2 * Pivot Point) - Prior Session High
Support 2 (S2) = Pivot Point- (R1 - S1)
Support 3 (S3) = Prior Session Low - (2 * (Prior Session High - Pivot Point))