Pivot Points have their own value position due to their leading nature, which helps predict potential next movements.
In Pivot Points trading, when the price moves above the central pivot (P), calculated as (High + Low + Close) / 3, it is regarded as a bullish sentiment. Conversely, when the price moves below the central pivot, it is considered bearish. Pivot Points (P, S1, S2, R1, R2) can serve as possible entry and exit points and function as stop-loss levels. They are applicable for intraday trading on 1- to 15-minute timeframes as well as for weekly charts, covering a wide trading range.
Despite their broad application range, backtests for Pivot Points trading have shown that this approach cannot consistently deliver results on its own. Based on backtests conducted across various instruments and areas, reversal strategies performed very poorly, while trend-following strategies showed average performance similar to simple breakout methods.
One of the main reasons Pivot Points trading shows low efficiency is that the recent market has evolved significantly. Frequent trading by bots, computational methods, and algorithmic systems has introduced many unpredictable noises, and the overall market ecology has become much faster due to machine trading.
Therefore, it is highly recommended to combine Pivot Points with other tools such as momentum indicators, candlestick patterns, multi-level systems, or any method that filters false signals. To achieve reliable results, it may be better to apply Pivot Points in range-bound movements and avoid highly volatile or trend-following markets.
This post is also published on Medium on April 14, 2025, by the same author.
