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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.

Pivot Point Basics First Entry

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Now it is a well known fact that many traders lose money using the MA Systems. The reason is simple if majority of the traders use the same MA as predetermined by the default settings in the charting software or the hot favorite 200 period MA, you are bound to lose as a trader since most traders are using these MAs in getting their trading signals.

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.

More about Pivot Points:

Pivot Point Trading Strategy – Two Specific Setups To Watch For

You can then draw horizontal lines on your chart marking the Central Pivot Point and then the other reference levels such as S1, S2, R1, R2 (S for support, R for resistance).

Forex Support and Resistance Indicator Explained

Personally, I always plot a daily point point on my 15 minutes charts. In fact, you can plot an hourly pivot or even weekly pivot depending on your preference.

Akamai at Key Pivot Point (AKAM)

Pivot points, or pivot prices, are key levels, where strong price movements one way or the other will occur in due time, though predicting the directional move is often difficult.

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