Pivot points are technical analysis indicators used to determine potential support and resistance levels in financial markets. They are calculated using the previous period's high, low, and close prices, providing traders with a reference point to predict price movements. The main pivot point (PP) is the average of these prices, while additional support (S1, S2) and resistance (R1, R2) levels are derived from this central point. Traders often use these levels to make informed decisions about entry and exit points in their trading strategies.