Moving Average Crosses as Directional Signals

Summary

This note describes a simple indicator that detects crossings between two moving averages. It treats a newly appearing cross as a possible trading signal and displays the direction of the most recent cross for as long as that direction remains in effect. The idea is to use the relationship between two averages to represent a change in directional bias, rather than relying on a single average alone.

The indicator can use simple, exponential, smoothed, or linear weighted moving averages. The document characterizes the calculation as straightforward and suitable for execution, but gives no parameter choices, entry or exit rules, market examples, or performance evidence. It also does not explain how the signal behaves in sideways markets, how often crosses may reverse, or how to manage risk. Traders would need to define and test those details before using the indicator in a strategy.

Key ideas

• The indicator marks crossings between two moving averages as potential trading signals.
• It retains the direction of the latest cross while that direction remains active.
• The moving average types available are simple, exponential, smoothed, and linear weighted.
• The document provides no backtest results or guidance on choosing average periods.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.