Moving average crossover
Family VI · Charts & indicators
Not to be confused with average true range, exponential moving average, moving average.
Moving average crossover is a chart event, not a separate indicator: it is defined by the relative position of two moving averages calculated on the same price series. When the shorter-period average crosses above the longer-period average, the event is commonly called a bullish crossover; the reverse is a bearish crossover. The signal is generated by the crossing itself, regardless of the absolute level of either average.
Construction
Two moving averages are plotted on the same price chart. The shorter-period average reacts faster to new prices; the longer-period average reacts more slowly. A crossover is recorded on the bar where the two lines change order.
- Common short periods: 5, 10, 20, 50.
- Common long periods: 50, 100, 200.
- Any pair can be used, and the choice of periods changes the frequency and lag of the signal.
The averages may be simple, exponential or weighted; the crossover rule is the same, but the values differ because each type weights recent prices differently.
Worked example
Interpretation and limitations
A crossover is a lagging event: both averages are computed from past prices, so the crossing is confirmed only after the move has begun. In ranging markets, price can oscillate around a slow average and produce repeated crossovers with little follow-through.
Crossovers are frequently combined with filters such as a minimum separation between the averages, a trend filter on a higher timeframe, or a volume condition. The number of signals and their reliability vary with the instrument, timeframe and chosen periods; no single pair of periods is universally optimal.
Often confused with
- average true range
- Average true range measures the average size of price movement over a period and does not compare two averages, so it produces a volatility value rather than a crossing signal; the visible sign is a single line plotted in price or percentage units, not two lines changing order.
- exponential moving average
- An exponential moving average is one type of average that can be used in a crossover, but it is a single line, not the event of two lines crossing; the visible sign is one line labelled EMA on the chart.
- moving average
- A moving average is the underlying line itself, calculated from past prices, whereas a crossover is the relationship between two such lines; the visible sign is a single line versus two lines intersecting.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci