![]() Most people have this anticipation that its too simple of an idea to work effectively. It will perform so well during a trending market though, it will make up for the losses occurred during the sideways market. ![]() You will long the top and short the bottom. Right off the bat, MA crossover strategy will NOT work well in a sideways and choppy market. See how signals are generated at a crossover of moving averages What is the downside and misconceptions? Hence, giving you the opportunity to benefit from every single large move. There is no way that the price will be below both moving averages for a considerable time and you won’t be short. This way, it allows you to be always on the right side of the market. You can see here how moving averages can track the price effectively. Things to keep in mind so you can grasp the idea better, the price needs to be trending above the both short term and long-term moving average for them to form a bullish cross and vice versa. The idea is that when the markets trend in way or another, the short-term moving average will be crossing up or down the longer-term moving average. Alternatively, it is considered to be a good long trade when 50 days moving average cross up the 200 days day moving average from below. It is considered to a good short trade if the 50 day moving average crosses down the 200 day moving average from above. ![]() Let’s look at golden cross for example since that’s the most popular MA Cross. You pick 2 moving averages on the same time frame with different periods. We will get into those later in this post What is the idea behind moving average cross over trading strategy? There are a lot of different ways you can weigh and track the moving average. Moving average is an indicator that calculates the average price of an asset by looking at the previous X number of days or hours.
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