A pivot point is a technical analysis indicator used to determine potential support and resistance levels in the trading markets. It is calculated as the average of the high, low, and closing prices from the previous trading period. The primary pivot point is often considered the most significant level, while additional support and resistance levels can be derived from it, typically referred to as 'support' and 'resistance' levels.
Traders often utilize pivot points to make informed decisions about potential price reversals and to set entry and exit points in their trading strategies. The use of pivot points can be especially effective in markets exhibiting clear trends or during periods of high volatility.