Pivot Points

asr: High Tower report(the news letter I got) for OIL S1/S2/pp/R1/R2 must have used one of these 4 methods, they worked very good for OIL . so when you need it investigate ( take 2 to 3 days input to these formulas and find which one is used )

Camarilla Pivot Points
The formula used in the calculation of Camarilla Pivot Points are:

R4 = C + RANGE * 1.1/2
R3 = C + RANGE * 1.1/4
R2 = C + RANGE * 1.1/6
R1 = C + RANGE * 1.1/12
PP = (HIGH + LOW + CLOSE) / 3
S1 = C - RANGE * 1.1/12
S2 = C - RANGE * 1.1/6
S3 = C - RANGE * 1.1/4
S4 = C - RANGE * 1.1/2

Woodie's pivot points
R2 = Pivot + ( H - L ) =
R1 = ( 2 x Pivot ) - L =
Pivot = ( H + L + 2 x C ) / 4 =
S1 = ( 2 x Pivot ) - H =
S2 = Pivot - ( H - L ) =

Fibonacci's pivot points
R3 = Pivot + 1.000 * (H - L) =
R2 = Pivot + 0.618 * (H - L) =
R1 = Pivot + 0.382 * (H - L) =

Pivot = ( H + L + C ) / 3 =
S1 = Pivot - 0.382 * (H - L) =
S2 = Pivot - 0.618 * (H - L) =
S3 = Pivot - 1.000 * (H - L) =
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I tried the Classic formula (pit session only) when I first started trading, abandoned it and returned to test it about 5/6 years ago. On the second occasion I backtested the classic (pit and 24 hour session) and found that the results produced were no better than random.

If you think about it, the problem lies with using the previous day’s range. The assumption behind the pivot formula is this: today’s range will be about the same as yesterday’s.

But this is not always the case. In fact, in the appropriate context, a small range today may mean a larger than normal range tomorrow; and a large range today may mean a smaller than normal range tomorrow.

Armed with this idea, I had the same pivot formula tested using the Average True Range for the pit session. But I made one change: this time I assessed whether the day’s Average True Range was to be normal, above normal or below normal. I then used mean for normal, mean +1 stdev for above normal, and mean -1stdev for below normal and I used this figure to assess the ‘PP” value in the formula.

The results obtained were superior to using yesterday’s range. This means of course the trader has to have some skills at assessing the likely strength day’s range.

In the way I use it, the formula’s of R1 and S1 tend to identify the high and low for the day. R2 and S2 tend to identify stronger or weaker than anticipated day and suggest I substitute the appropriate value (e.g. mean +1 rather than mean for the PP’s calculation). A market’s acceptance below R2 or above S2, (where PP is normal), suggests a trend day (i.e. a strong directional day).