PIVOT POINTS AND CALCULATED PRICES

[Igor Pereira]

Pivot Points in the Financial Market

How to Use Pivot Points with Institutional Reading

By Igor Pereira
Financial Market Analyst
Founder of ExpertFX School

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Pivot Points have been in the financial market for decades. They are widely used by short-term traders, institutional desks and quantitative algorithms.

However, despite its popularity, there is great misinformation about its correct application.

In this unique guide to ExpertFX School, we will structure the concept in a technical and professional way, showing how to use it efficiently — especially at XAU/USD.

Exclusive analysis – Igor Pereira:
“Pivot Points are not magic lines. They are statistical references of balance and price imbalance.”

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What Are Pivot Points?

Pivot Points are price levels calculated based on the previous price share — usually the day or the previous week.

They represent possible:

• support zones;

• Resistance zones;

• market balance points;

• Institutional decision-making areas.

The Central Pivot Point calculation is simple:

Pivot Central=(MaPivot Central=3(Medxima+Mınima+Fechamandnto)

In other words, it is the average price behavior of the previous period.

This average creates a mathematical reference that many participants use as operational basis.

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Professional Technical Interpretation

Pivot Central works as:

• balance line;

• Divisor between buyer and seller bias;

• Intraday sentiment indicator.

If the price is above Pivot:
→ Intraday trend tends to be a buyer.

If the price is below Pivot:
→ Intraday trend tends to be a saleswoman.

But that's just the surface layer.

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Pivot Points Complete Structure

In addition to Pivot Central (PP), there are additional levels:

• R1, R2, R3 (Resistances)

• S1, S2, S3 (Supports)

These levels are derived mathematically from Pivot Central and the amplitude of the previous period.

They indicate:

• Extension projections;

• Possible reversal zones;

• Intraday exhaustion points.

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Application in Gold (XAU/USD)

In XAU/USD, Pivot Points are particularly effective when:

• Matches Order Blocks;

• Confluent with Fair Value Gaps;

• align with liquidity levels;

• They are close to institutional areas in H1 or H4.

During the London–New York overlap, the price often:

• Test Pivot Central;

• reacts at R1 or S1;

• Expands to R2 or S2 on days of strong volatility.

Igor Pereira highlights:
“When Pivot coincides with institutional liquidity, the probability of reaction increases significantly.”

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"> Ignore macroeconomic context
"> Do not consider volume and volatility

Pivot does not replace structural analysis.

He complements.

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What to Expect when Using Pivot Points?

When correctly applied:

• Better target definition;

• More technical stops;

• Greater precision in breakups;

• Clearer reading of market balance.

On days with relevant economic data, such as:

• CPI;

• Payroll;

• interest decisions;

The price can break multiple levels of Pivot quickly, indicating strong institutional displacement.

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Impact on the Financial Market

Pivot Points function as a collective psychological reference.

When many participants use the same level:

• liquidity is concentrated;

• The reaction tends to be stronger;

• The statistical probability increases.

In gold, this is amplified by high institutional participation and sensitivity to the dollar.

In the screenshot below, I marked the maximum, minimum and closing share of the previous week's price. The resulting Pivot Point (red line) is the average of these 3 price levels.

Above and below the central point, other pivot levels can be found. They are called R1 – R4 for resistance pivot levels above the central pivot point and S1 – S4 for support pivot levels below the central pivot point.

Pivot levels S and R are calculated based on the central pivot point and the previous maximum and minimum share of the price. So the farther the maximum and the lower the pivot point, the farther the price levels are. S and R.

HOW TO USE PIVOT POINTS
There are several ways to use the Pivot Points and in this article I will present two negotiating techniques for Pivot Points. In our Masterclass we also teach the one-day trading method based on Pivot Points, along with other trading tools.

But generally, Pivot Points are used as a tool for support/resistance trading that allows us to time negotiations more effectively.

To the left, you see how the central Pivot Point acted as support several times in points (1) and (2). In point (3), the central Pivot Point acted as resistance. Especially Pivot Point Central works well because many traders use it. In the later part of this article, we will take a look at trading strategies based on Pivot Point central.

On the right, we see a rejection of the Pivot Point along with a pattern of signaling. Central Pivot Point rejections are a powerful tool and can build the foundation of various trading systems, as we will see below.

PIVOT POINT NEGOTIATION CENARY
1. REJECTION OF THE PIVO POINT
Central Pivot Point rejections and false escapes are a popular negotiation strategy.

For this, a trader would expect the price to move to Pivot Point Central, make a move beyond it, and when the price fell, it would start a trend.

In the screenshot below, you see two examples of this type. The price tried, on two consecutive days, to break Pivot Point down, but failed every time. The price couldn't get above Pivot Point Central. Especially during the long-lasting trend phases, trend monitoring inputs may be moments that use the failed escape approach.

Sometimes the false breakup occurs with a candle confirmation signal. In the screenshot below, the price broke below the Pivot Point and the next candle formed a small pinbar. Ideally, pinbars are bigger, but the idea is the same. The pinbar shows lack of follow-up and indicates rejection.

In the screenshot below, we first see a rejection of the Pivot Point at point (1), where the price tried to break above it and then fell down quickly. The candle that shows rejection was the huge low sail that closed below the Pivot Point. This great candle clearly shows the lack of interest of buyers.

Point (2) foretells our next Pivot Point strategy. Often, you will see that the price is hovering on one side of the central point, without being able to break it. Sometimes we will be able to identify a price action pattern around these levels. In this case, we can draw a trend line, marking a flag pattern. Breaking the pattern then allows us to time negotiations away from the Pivot Point. The lack of impulse that didn't allow the price to break Pivot Point was the first clue here.

2. PIVOT STANDARD BREAKDOWN
When the price hovers below or above a central point for multiple candles without being able to break it, this may already indicate lack of impulse.

In the screenshot below, the price oscillated below the central Pivot Point in points (1) and (2) for a long time. At the same time, a trend line was established during this period below the central Pivot Point. So the trader just had to wait for the price to break the trend line to start looking for trading opportunities.

In point (3), the price was already on a prolonged downward trend and the price did not come close to the central pivot point while establishing the flag trend line pattern.

During a trend market, such an approach can be used to synchronize the negotiations towards the trend.

The scenario at point (1) in the screenshot below shows another break in the trend line just after the price has hovered below the center point for a long time.

In point (2), the price established a horizontal level of support as a breakup level. The price was also negotiated below the central Pivot Point in this example for a long time, without being able to break it. Whenever you are able to set a pattern with a horizontal support/resistance line or trend line, you can look for trading opportunities if the Pivot Point context also indicates a potential commercial idea.

Of course, trading Pivot Points alone is generally not robust enough and it is always advisable to add additional confluence factors around such a trading approach. But it is an excellent starting point for any negotiation strategy and as an alternative approach to common support/resistance tools.