As the name suggests - Moving Average Crossovers - also known as MA Crossovers are exactly that - cross of TWO Moving Averages (MA's)
Traders since trading began tried to figure out the "Holy Grail" of not just one-time grand success - but deliberate continuous success.
By the way - Trading is NOT a lottery ticket - where you hit one jacpot-trade & walk away with your millions - its a slow & deliberate effort to gain ground - every time you trade - and evidently losing some of it along the way - at the end of day (so to speak) - if you gained more ground than you lost - you my friend are a successful trader.
Another important point (I know I digress - but this is important) Its never at the END OF THE DAY - its usually at the end of the QUARTER (3-months trading) or end of the MONTH - is when you evaluate your trades. Evaluating your trades per day is a HUGE mistake novices make - constant evaluation & changing strategies is like grinding gears on a ferrari. You've got change gears at the right time - and let it do - what its designed to do best - zoom.
Strategies are meant to be tested over a period of time - not just a day or two.
Ok! back to MA crossovers.
Typically traders look for TWO MA's to cross - here's an example: SMA (10) and SMA (100). SMA = Simple Moving Average - there are other types which we will discuss later.
The idea behind this strategy is that one MA is following the MAJOR trend of the market - in the above example SMA(100) and the other the MINOR trend of the market (SMA 10) - when they cross - there is a major shift in the market - Typically one of the four is supposed to have happened: Market is moving from...
- downtrend to uptrend or
- sideways to downtrend or
- sideways to uptrend or
- uptrend to downtrend
Based on the crossover - the strategy triggers a SELL or a BUY signal.
Its a mistake JUST TO FOLLOW MA Crossovers - most successful MA crossover strategies include CONFIRMATION signal - like RSI or other volume indicator to show the market is indeed gaining strength in its momentum - which translates to - others are also joining the market - more players = more movement.
You can google for MA crossover strategies & BACK-TEST them to see their rate of return - if satisfied, go for it - but please make sure you have confirmation signal before placing a trade - which is very important - as MA crossovers are known to give false signals too.
Otherwise, this is one of the favorite strategies - many discussion boards have dedicated much time and traders everyday are coming up with - what they think is the BEST - MA crossover strategy.
Happy Safe Trading.
Don't forget rule #1: Don't lose your capital.
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