A pivot point is an indicator developed by floor traders in the commodities markets to determine potential turning points. In the forex and other markets, day traders use pivot points to determine likely levels of support and resistance, and therefore possible turning points from bullish to bearish or vice versa.
PP stands for Pivot Point.
S stands for Support.
R stands for Resistance.
Here are five types of the most popular pivot points.
Standard pivot points
Standard pivot points are the most basic pivot points that day traders can calculate. First, traders start with a base pivot point. That’s the average of the high, low, and close from a previous period.
Fibonacci Pivot Points (The Most Popular)
Fibonacci extensions, retracements, and projections are commonly used in forex, but are used with equities as well. The Fibonacci retracement levels are named after a mathematical sequence.
Woodie’s Pivot Point
Woodie’s pivot points place more weight on the closing price. However, the calculation is similar to the standard pivots formula.
Camarilla Pivot Points
Another pivot point that traders use are Camarilla pivot points.
It’s similar to the Woodie’s pivot point. However, there are four resistance levels and four support levels. In contrast, the Woodie pivot point has two Resistance levels and two Support levels.
Demark Pivot Points
The Demark pivot point uses the number X to calculate the lower level line and the upper resistance level. It also emphasizes recent price action.