Do you know how to implement moving average crossovers in trading? Moving averages are widely used indicators in technical analysis that helps smooth out price action by filtering out the noise from random price fluctuations. There are two commonly used moving averages. They are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).
The SMA or Simple Moving Average is the simple average of a security over a defined number of time periods. The EMA or Exponential Moving Average gives greater weight to more recent prices. In essence, moving averages show trends and can be used at support and resistance.
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What is a Moving Average Crossover?
A moving average crossover takes place when a quicker moving average crosses over a slower one. Does it work? More often than not crossovers do signify trend reversals. However, it’s important to note that MACD is a lagging indicator and isn’t a foolproof indicator. No trading indicators are foolproof.
In this post we’re going to talk about the moving average crossover. Do you know how to implement moving average crossovers in trading? Moving averages are widely used indicators in technical analysis that helps smooth out price action by filtering out the noise from random price fluctuations. There are two commonly used moving averages. They are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).
The SMA or Simple Moving Average is the simple average of a security over a defined number of time periods. The EMA or Exponential Moving Average gives greater weight to more recent prices. In essence, moving averages show trends and can be used at support and resistance.
Which Moving Average Crossover is the Best?
- The moving average crossover of the 9 ema and the 20 ema is one of the best short term trend reversals.
- A golden cross is a good long term bullish trend reversal. It’s when the 50 moving average crosses above the 200 day.
- Death crosses are bearish reversal patterns when the 50 MA crosses below the 200 day MA.
The 9 and 20 exponential moving average (EMA) crossover strategy is a great tool. You can add these EMAs to your 1 and 5 minute charts for day trading. This strategy is excellent in helping you determine the direction of a stock and when to get in and out.
When it’s used on the 2 time frames of the 1 and 5 minute charts it’s awesome. When the 9 is over the 20 then price is bullish and the 9 pushes price up. As long as price is above the 9 on the 1 minute chart, staying in a stock is a no brainer.
If price falls below the 9 but the 9 and 20 EMAs are still bullish and have not crossed than watching the 5 minute chart can be a great tool in telling you when to get in and out. If price is staying above the 9 on the 5 minute chart then you can make a determination on whether or not you believe you should stay in or get out.
When a 9 and 20 crossover happens and the 20 EMA is over the 9 EMA that is a bearish signal. You should definitely be getting out or if you want to short than you take a position.
You will notice that 9 and 20 crossovers happen all throughout the day. In fact, this makes this probably one of if not the best moving average crossover for intraday trading.
Swing Trading
The moving average crossover is a great indication of the direction for swing trading. Use it on the daily chart to show you the trend. The moving averages will tell you what direction the stock is moving.
If you are holding a stock more than a day, you do not want to buy a stock that is going against the trend on the daily chart. The MACD is extremely useful for this as well as the moving average lines. They will show you what direction the stock is headed and you can ride the trend
