Traders have gone to work figuring out the best way to calculate pivot points for all of their trading needs, and you should know about as many of these methods as possible. We want to discuss a few of the different ways that one may calculate pivot points so you can figure out what you need to do in order to get the most from the various ways that you may calculate pivot points.

Fibonacci Pivot Point

If there is a pivot point calculation that you have heard of already, it is probably the Fibonacci pivot point. This is a very popular choice among traders, and it is used every day by some of the most seasoned professionals in the trading world.

Traders who use the Fibonacci method tend to trade along with the 38.2%, 61.8%, and 100% retracement levels when determining their entry and exit points.

The full calculation for Fibonacci pivot points looks like this:

R3 = PP + ((High – Low) x 1.000)

R2 = PP + ((High – Low) x .618)

R1 = PP + ((High – Low) x .382)

PP = (H + L + C) / 3

S1 = PP – ((High – Low) x .382)

S2 = PP – ((High – Low) x .618)

S3 = PP – ((High – Low) x 1.000)

C – Closing Price, H – High, L – Low

Most trading platforms make it easy for you to trade with the Fibonacci pivot points because they have built-in tools that will do all of the calculations for you. You just need to draw the lines and the program will run the figures for you. You can see how this looks on the chart here:

 

 

Camarilla Pivot Point

Once again, we start with the formula used to calculate the Camarilla pivot point:

R4 = C + ((H-L) x 1.5000)
R3 = C + ((H-L) x 1.2500)
R2 = C + ((H-L) x 1.1666)
R1 = C + ((H-L) x 1.0833)
PP = (H + L + C) / 3
S1 = C – ((H-L) x 1.0833)
S2 = C – ((H-L) x 1.1666)
S3 = C – ((H-L) x 1.2500)
S4 = C – ((H-L) x 1.5000)
C – Closing Price, H – High, L – Low

You may have noticed that this is similar to the Woodie pivot point. They both rely on a range of figures based on previous open and closing prices. However, the Camarilla pivot point will generate a total of 8 major points (4 support and 4 resistance) that can help you determine where you see support and resistance levels.

The concept behind the Camarilla pivot points is that price action will tend to revert back toward the mean over time. This is similar to the theory used for many different types of trades, but it is important to recognize that the Camarilla pivot point calculation offers many more pivot points than many other formulas. This provides traders with extra confidence in their pivot points and more choices than ever as far as where to place their trades

Woodie Pivot Point

Let us move on to the formulas that go into the calculation of a Woodie Pivot Point. Here is the breakdown:

R2 = PP + High – Low
R1 = (2 X PP) – Low
PP = (H + L + 2C) / 4
S1 = (2 X PP) – High
S2 = PP – High + Low
C – Closing Price, H – High, L – Low

This is a much different calculation than the standard pivot point calculation that people use every day in the market. Don’t be surprised when the pivot levels that are calculated via the Woodie pivot point method are much different than the levels that are calculated via a standard pivot point calculation. They are meant to be different, and the end result is supposed to be a completely different calculation from what you get with a standard pivot point.

Take a look at this chart to get an idea of the kind of pivot levels that may be revealed with the Woodie pivot point:

Which Method is Best?

There isn’t a single method that trumps all others. It often comes down to what a trader is used to trading, how they prefer to do their calculations, and what they do or don’t know about the market already. Getting comfortable with all of these calculations is important, but you don’t want to assume that any method is better than the others. You should always adapt to market conditions as they are presented to you.

 

Disclaimer: All information provided here is intended solely for study purposes related to trading financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis, or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of SurgeTrader and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose.