Pivot Point Strategy: Daily Levels
A pivot point strategy that uses daily-calculated support and resistance levels to trade intraday reversals and breakouts.
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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.
Strategy is for educational purposes only. Not financial advice.