Pivot point

A pivot point is a technical analysis indicator calculated using the high, low, and closing prices from a previous trading period. From this central pivot, several support and resistance levels are projected. These levels are derived mathematically, often using common formulas like the standard, Fibonacci, or Woodie's methods, providing a framework for potential price reversals or accelerations.

For a retail trader, pivot points offer predefined price levels to consider for entry and exit strategies. They are commonly used to set stop-loss orders below support or take-profit targets above resistance. Relying solely on pivot points without other confluence factors can lead to false signals, as price does not always respect these calculated levels precisely, increasing risk.