Pivot Point Strategy: Daily Levels

Overview

Pivot points are mathematically derived support and resistance levels calculated from the prior day's high, low, and close. Many traders watch them, which makes them self-fulfilling. This strategy trades the reaction at the daily pivot and its support/resistance levels (S1, S2, R1, R2) on intraday charts, using price action to confirm the level holds.

Setup

Instruments: forex majors, index futures, stocks
Timeframe: 15-minute and 1-hour intraday
Indicators: daily pivot points (P, R1, R2, S1, S2), ATR(14)
Market regime: any — pivots work in trends and ranges alike

Standard pivots use the prior day's values: P = (high + low + close) / 3, R1 = 2P − low, S1 = 2P − high, and so on.

Entry rules

Plot the daily pivot levels at the session start
Long at S1 or S2: wait for a bullish reversal candle that closes back above the level
Short at R1 or R2: wait for a bearish reversal candle that closes back below the level
Breakout mode: if price breaks R1 with volume, enter long targeting R2; mirror for S1 to S2
The pivot line (P) itself is a magnet — price often returns to test it

Stop loss

Stop just beyond the pivot level being traded
Maximum stop: 1 × ATR(14) on the timeframe used
Exit if a candle closes beyond the level — it has failed

Use the stop loss calculator to set the distance.

Take profit

Fade trades: target the next pivot toward the center (P)
Breakout trades: target the next pivot in the breakout direction (R1 → R2)
Aim for a minimum 1.5R

Confirm with the risk-reward calculator.

Risk management

Risk 1% of account equity per pivot trade
Position size = risk amount ÷ (entry − stop). Verify with the position size calculator
Maximum two pivot trades open on correlated instruments
Reduce size when pivots cluster tightly (low ATR days) — levels are too close to separate

When it fails

Pivot strategies fail when the day's range blows through multiple pivots in one direction — a trending day that ignores the levels. If R1, R2, and R3 all break in the first hour, the market is trending; switch to a breakout or trend-following approach rather than fading the next pivot.