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Moving Averages are one of the most widely used technical indicators and are highly popular with technicians or those traders who use technical analysis in their trading a lot. Many automated trading systems also depend on moving averages (MAs). These MAs are used to signal a change in the trend as well as smooth out volatility in the market.

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If you want to make money with MAs than use a different set of values as compared to those being used by the majority of the traders. If the traders are using the 20, 50, 100 or 200 period MAs than don’t use them in your trading system. One way it to use the pivot point moving averages.

Now, what time period to use in calculating the pivot point moving average (PPMA). The best time period is the three period pivot point MA system that is obtained the dividing the three latest pivot point of the past three periods. The three point PPMA can act as a support number in case of a bullish market and as a resistance number in case of a bearish market.

Now when the market changes direction from an uptrend to a downtrend, the price action will tend to bounce off the three period pivot point MA as a support and then when the downtrend develops, it will bounce as a resistance.

Whatever, a pivot point moving average uses more than the closing price of a period rather it uses the true average that incorporates the range of the period and can give you a better picture than the simple moving average.