Put a fast moving average and a slow one on the same chart. When the fast one crosses above the slow one, momentum is turning up. Crossing below: turning down.
Famous crossovers
- Golden cross: 50 crosses above 200. Bullish headline material.
- Death cross: 50 crosses below 200. Bearish headline material.
The catch
Crossovers are late. By the time the lines cross, part of the move is gone. And in ranges, they cross back and forth constantly (whipsaws).
Wick says
I once traded every crossover in a sideways market. Bought, sold, bought, sold... and paid the spread every single time. Ranges eat crossover traders for breakfast.
Pro tip
Filter crossovers: only take bullish crosses when price is above the 200 MA, and skip them when the market is flat.
Key takeaways
- Fast above slow = bullish; fast below slow = bearish.
- Crossovers lag and fail in ranges.
- Use them with a trend filter.