The pivot itself can be used as somewhat of a test price for the short-term trend. The pivot point represents a weighted average of the previous day's session since it is the average of the high, low and settlement. If the market rallies above the pivot point, for example, the market may be indicating some strength. A weak market would be suggested by a price move below the pivot point.

Pivot points are used primarily as support/resistance numbers. Of the first pivot values, the pivot point itself is the best support/resistance level. The 1st and 2nd support/resistance levels have less reliability. All these pivot numbers are very popular on the exchange floors and are used by a significant number of traders. Pivot points are used in our technical indicators.

Here is the formula used in pivot points (this is for each bar, regardless as to if it is a day, 10 min., 30 min., etc.):

• the Pivot Point is the average of high, low or close
• support level 1 is Pivot Point x 2 - High
• support level 2 is Pivot Point - High + Low
• resistance level 1 is Pivot Point x 2 - Low
• resistance level 2 is Pivot Point + High - Low