Rarely a day goes by that someone doesn't ask "how do you calculate the pivot point". And while their are many different ways of coming up with this number, let me share with you what I think is the most common method.
Pivot points are very useful tools that use the previous bars' highs, lows and closings to project support and resistance levels for future bars. Daily pivot points are useful for swing trading. Longer term pivot points provide an idea of where key support and resistance levels should be. Place the pivot points on your charts and see how traders appear to give pivot point levels a lot of respect.
Daily pivots are calculated from previous day's high, low, close. Weekly pivots are calculated from previous week's high, low, close. The pivot levels and charts are updated throughout the day to cater for data adjustments during the day.
Formula: Pivot Point = Previous trading sessions high + close + low, divided by 3.
Try working this on all of your favorite tickers and watch the traders "show some respect"!
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