Pivot Point Calculations
The calculations of the standard pivot points are actually very simple, but the amount of time that should be included, and the time zone that should be used, are often sources of confusion.
For markets that are only open during regular trading hours (such as the DAX futures market), the pivot points should be calculated using the high, low, and close of the previous trading day, using the time zone of the market in question (e.g. the pivot points for the DAX futures market should be calculated from 8:00 AM to 10:10 PM Central European Time).
For markets that are open 24 hours (such as the EUR futures market), the pivot points should be calculated using the high, low, and close of the previous 24 hours, using the time zone of the market in question (e.g. the pivot points for the EUR futures market should be calculated from 12:00 AM to 12:00 PM US Central Time). The reason for including the full 24 hours, is that without the overnight data, the actual high and low might be missed, which would change the pivot point values. However, there is a catch to this, in that the closing price should be the closing price of the regular trading session (also known as the settlement price), rather than the closing price at midnight.
Be aware that while most charting software includes the standard pivot points as one of their indicators, they usually do not calculate the pivot points correctly. Charting software usually uses the local time zone of the trader's computer, and uses the close at midnight rather than the close of the regular trading session. If this is the case with your charting software, you may need to calculate the pivot points yourself (using the correct times), and then draw the pivot points on your charts as horizontal lines.
Adam Milton
