The full formula
P = (H + L + C) ÷ 3
R1 = 2P − L · S1 = 2P − H
R2 = P + (H − L) · S2 = P − (H − L)
R3 = H + 2(P − L) · S3 = L − 2(H − P)
Why do such simple levels work? Because they are partially self-fulfilling: thousands of traders and systems compute identical numbers from identical data, so orders genuinely cluster around them — the same logic as support and resistance, but with pre-computed levels.
How they are traded in practice
- Bias filter: price above the pivot → look for longs only; below it → shorts only.
- Bounce: buy near S1 with a stop below S2, or sell near R1 with a stop above R2.
- Breakout: a candle close beyond R1 makes R2 the logical target.
The levels pair with candlestick patterns as timing signals at the level, and with the risk/reward calculator to evaluate the setup before entry.