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Pivot point calculations are used by security traders to attempt to predict support and resistance levels. They are commonly used in the forex and commodity futures markets. Pivot point analysis is a subset of technical analysis, although it is not as popular or well known as other technical methods.
Pivot points are frequently used by foreign exchange traders as a means to calculate resistance and support levels which are, in turn, used as visual cues to execute trades. Pivot point calculations provide traders with objective visual bench marks which some use to predict price changes, although the validity of these levels is still subject to debate.
the formula of the pivot point is:
PP = (H + L + C)/3
The first resistance level(R1)=(PPx2)-L
The second resistance level (R2)=PP+H-L
The first support level (s1)=(PPx2)-H
The second support level (S2)=PP-H+L