Floor Trader Pivots: Unlock Precision Trading in Volatile Markets
Floor trader pivots are calculated using the previous day’s market data—specifically the high, low, and close prices. The central pivot point (main pivot point) divides the market into two zones:
These levels help day traders assess market conditions for the next trading session.
Pivot Point Calculation
The formula for the Daily Pivot (P) is straightforward:
- P = (H + L + C) / 3 Where:
- H = High of the previous day
- L = Low of the previous day
- C = Close of the previous day
This pivot line acts as the primary reference for trading activity, dividing the market into support and resistance levels.
Support and Resistance Levels
In addition to the daily pivot level, three additional support levels (S1, S2, S3) and resistance levels (R1, R2, R3) are calculated using the central pivot:
- R1 = 2 × P – L
- R2 = P + (H – L)
- R3 = R1 + (H – L)
- S1 = 2 × P – H
- S2 = P – (H – L)
- S3 = S1 – (H – L)
These levels help traders anticipate prices where buying or selling pressure may emerge.
-
Resistance levels (R1, R2, R3) indicate potential turning points where the price may reverse downward.
-
Support levels (S1, S2, S3) suggest potential buying areas where prices may reverse upward.
Example of Trading with Floor Trader Pivots
Suppose the market opens near the daily pivot level and pushes toward R1. If the price fails to break above R1 and starts to pull back, it suggests that the resistance at R1 is strong, and the trader might consider exiting a long position or going short.
Conversely, if the price breaks above R1, it’s likely to continue toward R2 or even R3, signaling a bullish move.
Using pivots allows traders to set clear entry and exit points, reducing uncertainty in actual trading.
