Pivot point is a point of rotation. It's the level where market price is potentially being rotated back to where market price came from or being continued and manufacture requisite length from pivot point.
Pivot point calculated by using previous period's high, low, and conclusion prices taken from the daily chart. Most of traders use pivot level together with reserve and resistance levels to predict daily market price movement.
Every day the market you are following has an open, high, low and a close for the day (some markets like forex are 24 hours but ordinarily use New York market's conclusion time as the open and close). This facts basically contains all the data you need to use pivot points.
In order to hypothesize pivot level, we need 3 prices which are:
H = previous period's high price
L = previous period's low price
C = previous period's conclusion price
Then hypothesize pivot level using this equation:
Pivot Point (Pp) = (High + Low + Close) / 3
Support and resistance levels are then calculated off of this pivot point using the following formulas:
Resistance:
R1 = Resistance Level 1 = (2*Pp)-L
R2 = Resistance Level 2 = (Pp-S1) + R1
R3 = Resistance Level 3 = (Pp-S2)+R2
Support:
S1 = reserve Level 1 = (2*Pp)-H
S2 = reserve Level 2 = Pp - (R1 - S1)
S3 = reserve Level 3 = Pp - (R2-S2)
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