What is S1, S2, S3, R1, R2, R3 in trading?

S1, S2, S3, R1, R2, R3 are support and resistance levels calculated from daily price data using a pivot point formula.

The Definitions

R3 (Resistance 3) = Highest resistance level (strong ceiling) R2 (Resistance 2) = Secondary resistance level R1 (Resistance 1) = Primary resistance level (closest above current price)

Pivot Point = Midpoint (balance level)

S1 (Support 1) = Primary support level (closest below current price) S2 (Support 2) = Secondary support level S3 (Support 3) = Lowest support level (strong floor)

How To Calculate Them

Step 1: Get Daily Data - High: The highest price during the day - Low: The lowest price during the day - Close: The closing price

Example: Stock high = $102, low = $98, close = $100

Step 2: Calculate Pivot Point Pivot = (High + Low + Close) / 3 Pivot = (102 + 98 + 100) / 3 = 100

Step 3: Calculate Resistance Levels - R1 = (2 × Pivot) - Low = (2 × 100) - 98 = 102 - R2 = Pivot + (High - Low) = 100 + 4 = 104 - R3 = R1 + (High - Low) = 102 + 4 = 106

Step 4: Calculate Support Levels - S1 = (2 × Pivot) - High = (2 × 100) - 102 = 98 - S2 = Pivot - (High - Low) = 100 - 4 = 96 - S3 = S1 - (High - Low) = 98 - 4 = 94

The Levels: - R3: $106 - R2: $104 - R1: $102 - Pivot: $100 - S1: $98 - S2: $96 - S3: $94

How Traders Use These Levels

For Entry Points

Breakout Entry: - Buy above R1 ($102) = breakout above resistance - Sell below S1 ($98) = breakdown below support

Bounce Entry: - Buy at S1 ($98) = price bounces from support - Sell at R1 ($102) = price bounces from resistance

For Stop-Loss Placement

Long Trade Stop: - Entry at S1 ($98) - Stop-loss below S2 ($96) or S3 ($94) - If price hits S3, the bounce thesis is broken

Short Trade Stop: - Entry at R1 ($102) - Stop-loss above R2 ($104) or R3 ($106)

For Profit Targets

Long Trade: - Buy at S1 ($98) - Target R1 ($102) = $4 profit per share - Target R2 ($104) = $6 profit per share - Target R3 ($106) = $8 profit per share

Short Trade: - Sell at R1 ($102) - Target S1 ($98) = $4 profit per share - Target S2 ($96) = $6 profit per share - Target S3 ($94) = $8 profit per share

When Pivot Levels Work

Works Best: - Ranging markets (price bouncing between support/resistance) - Choppy, sideways trading - Intraday trading (these pivot points refresh daily) - Liquid markets (stocks, forex, commodities)

Doesn't Work Well: - Strong trending markets (price ignores levels) - After gap openings (levels from previous day become irrelevant) - Before major news (markets disregard technical levels) - Illiquid markets (wide spreads distort levels)

Example Trade Using Pivot Levels

Setup: - Stock closes at $100 (using example above) - R1 = $102, S1 = $98 - Pivot = $100

Morning Price Action: - Stock opens at $99 (below pivot) - Stock drops to S1 ($98) and bounces - You buy at $98.50 (near S1) - Stop-loss below S2 at $95 - Target at R1 ($102) - Risk: $3.50 per share - Reward: $3.50 per share - Risk-reward: 1:1 (not great, but acceptable)

Result: - Stock bounces to $102 and you sel