Moving average crossover
A moving average crossover is a rule that acts when a faster moving average crosses a slower one, treating the cross as a change in trend.
How Moving average crossover is calculated
Compute two averages of the same price, for example a 50-bar and a 200-bar. A bullish cross is the bar where the fast line moves from below the slow line to above it. A bearish cross is the reverse. The rule needs three choices: which average type, which two lengths, and what to do on each cross.
How it is read
Some traders hold only while the fast line is above the slow one. Others use the cross as a filter for other signals. Longer pairs cross less often.
Common mistakes
- Counting only the crosses that led to a big move. Most crosses in a sideways market reverse within days.
- Optimising the two lengths on the same history used to judge the rule.
- Ignoring costs. A rule that crosses often pays the spread and fees every time.
Test it yourself
Add an entry rule where one moving average crosses above another, then set an exit by a number of bars, a stop, or the reverse cross. The Lab charges trading costs on every trade, fills on the next day's open, and shows how many attempts you have made.
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
Lessons that cover it
Related concepts
- Simple moving average (SMA)
- Exponential moving average (EMA)
- Golden cross and death cross
- Overfitting
- All concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.