Pivot Point analysis is a technique of determining key levels that price will react to. Pivot points tend to function as support or resistance and can be turning points. This technique is commonly used by day traders, though the concepts are valid on various timeframes. There are several methods for calculating and identifying the exact points. Most use a variation of significant prices such as established highs, lows, opening and closing prices and then apply a simple calculation to determine these points.
Some methods calculate one pivot point, others calculate several and again others calculate additional support and resistance levels alongside the pivot points. They can be used to determine when to enter or exit trades or to determine the range of a market. Conservative traders look for additional confirmation before entering a trade. Whether pivot points are used alone or in combination with other techniques, they are a useful tool in a technical trader's toolbox.