PP is the pivot point line. R1, R2, … and S1, S2, … are the computed support and resistance levels. The computation depends on how the user configures the settings.
The High, Low, Close prices described below are taken from the target bar which defaults to yesterdays daily bar (Bar Interval = 1 Day, Bars Back = 1).
There are 4 methods.
Method 1: Floor (default)
PP = (High + Low + Close) / 3
R1 = (2 * PP) – Low
R2 = PP + High – Low
R3 = High + (2 * (PP – Low))
S1 = (2 * PP) – High
S2 = PP – High + Low
S3 = Low – (2 * (High – PP))
Method 2: Woodie
PP = (High + Low + (2 * Close)) / 4
R1 = (2 * PP) – Low
R2 = PP + (High – Low)
R3 = High + (2 * (PP – Low))
R4 = PP + ((High – Low) * 3)
S1 = (2 * PP) – High
S2 = PP – (High – Low)
S3 = Low – (2 * (High – PP))
S4 = PP – ((High – Low) * 3)
(Some systems use the next day’s Open instead of the Close price for PP.)
Method 3: Camarilla (support and resistance lines only)
R1 = Close + ((High – Low) * 1.1 / 12.0)
R2 = Close + ((High – Low) * 1.1 / 6.0)
R3 = Close + ((High – Low) * 1.1 / 4.0)
R4 = Close + ((High – Low) * 1.1 / 2.0)
S1 = Close - ((High – Low) * 1.1 / 12.0)
S2 = Close - ((High – Low) * 1.1 / 6.0)
S3 = Close - ((High – Low) * 1.1 / 4.0)
S4 = Close - ((High – Low) * 1.1 / 2.0)
Method 4: Demark
If today’s open > yesterday’s close: X = High + (2 * Low) + Close
If today’s open < yesterday’s close: X = (2 * High) + Low + Close
If today’s open = yesterday’s close: X = High + Low + (2 * Close)
Then…
PP = X / 4
R1 = (X / 2) – Low
S1 = (X / 2) – High
As far as the strengths and weaknesses of any of the above methods… Google would be the best resource. Also, the Support/Resistance lines can be hidden by setting “Support/Resistance Levels” to 0 in the settings. Midpoint lines can also be added by checking the appropriate checkbox.