Pivot points are a set of horizontal lines calculated from the previous day's high, low, and close. The central pivot (PP) is the average of those three values. From there, support levels (S1, S2) and resistance levels (R1, R2) are derived using simple formulas: R1 = 2×PP - Low, S1 = 2×PP - High, and so on.

Floor traders invented pivot points decades ago when they needed quick reference levels before computers were common. They've stuck around because they work, not as magic lines where price always reverses, but as zones where other traders are also watching. When enough people pay attention to the same level, it becomes self-fulfilling to a degree.

The main pivot (PP) acts as a dividing line for the day's bias. If the stock opens and trades above PP, the day leans bullish, and R1/R2 become upside targets. If it opens below, the day leans bearish, and S1/S2 become downside targets. These levels are recalculated daily, so they only apply to intraday trading. They're straightforward to compute and don't require any parameter tuning.