Pivot points are calculated support and resistance levels based on the previous period's high, low, and close. Originally used by floor traders in commodity pits, they remain one of the most objective and widely referenced technical levels. Unlike subjective trendlines, pivot points are mathematical — every trader using the same method gets the same levels, making them self-fulfilling to some degree.
Floor Pivot (Standard) calculation: Pivot Point (PP) = (High + Low + Close) / 3. Support 1 (S1) = (2 × PP) - High. Resistance 1 (R1) = (2 × PP) - Low. Support 2 (S2) = PP - (High - Low). Resistance 2 (R2) = PP + (High - Low). Support 3 (S3) = Low - 2 × (High - PP). Resistance 3 (R3) = High + 2 × (PP - Low). The pivot point itself is the key level — price above the pivot is generally bullish, below is bearish.
Fibonacci Pivots modify the standard calculation by incorporating Fibonacci ratios. PP = (High + Low + Close) / 3. R1 = PP + 0.382 × (High - Low). S1 = PP - 0.382 × (High - Low). R2 = PP + 0.618 × (High - Low). S2 = PP - 0.618 × (High - Low). R3 = PP + 1.000 × (High - Low). S3 = PP - 1.000 × (High - Low). These levels often align with Fibonacci retracement levels of the prior day's range, providing additional confluence.
Camarilla Pivots were developed by Nick Stott in 1989 and are particularly useful for intraday trading and identifying reversal vs. breakout scenarios. The formulas use a 1.1 divisor: R4 = Close + (High - Low) × 1.1/2. R3 = Close + (High - Low) × 1.1/4. R2 = Close + (High - Low) × 1.1/6. R1 = Close + (High - Low) × 1.1/12. S1 = Close - (High - Low) × 1.1/12. S2 = Close - (High - Low) × 1.1/6. S3 = Close - (High - Low) × 1.1/4. S4 = Close - (High - Low) × 1.1/2. The key levels are S3/R3 (reversal zones) and S4/R4 (breakout zones).
Trading strategies with pivots: (1) Pivot bounce: When price approaches S1 or R1 and reverses, enter in the reversal direction with a target of the pivot point. (2) Pivot breakout: When price breaks through R1 with volume, target R2. If it breaks R2, target R3. (3) Opening range with pivots: Note where price opens relative to the pivot — opening above suggests a bullish day, below suggests bearish. (4) Range days: In low-ADX environments, price tends to oscillate between S1 and R1.
Weekly and monthly pivots are particularly powerful for swing trading. Calculate pivots using the prior week's or month's high, low, and close. Monthly pivot points often align with significant support/resistance zones and can act as magnets for price. Professional traders on the EGX often reference monthly pivots for medium-term positioning.
Pivot points in the Egyptian market: (1) Daily pivots work well for timing entries and exits. (2) Use weekly pivots for swing trading EGX stocks. (3) Monthly pivots on EGX30 provide key levels for index-level analysis. (4) Combine pivots with candlestick patterns — a bullish engulfing at S2 is a high-probability long setup. (5) Pivots are most effective in range-bound markets; in strong trends, price may blow through multiple levels. (6) The pivot point itself is the most important level — it often acts as the day's "fulcrum." This is not financial advice.
This content is for educational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.