Technical traders often view this crossover as a bearish long-term technical signal, but traders that sold the index and its components at the time of the cross sold the Dow following a drop of about 3. The idea behind trading crossovers is that a short-term moving average above a long-term moving average is an indicator of upward momentum in a stock, and the opposite is true about a short-term average trading below a long-term average.
The day and day SMAs are conventionally used in determining crossovers, but are they the best averages to trade? ETF HQ tested a massive number of combinations of moving averages to determine which two averages generated the highest crossover trading returns. They used a total of years worth of daily and weekly data from 16 different global indices to determine which two moving averages would have produced the largest gains for crossover traders.
First, ETF HQ found that exponential moving averages EMAs , which weight most recent prices heavier than earlier prices, perform better overall than SMAs, which weight all prices in the timeframe equally.
Among short- and long-term EMAs, they discovered that trading the crossovers of the day and Benzinga does not provide investment advice. Membership is Free What are you waiting for? Free Account Login Click here to access your premium account. Contribute Login Sign up. Benzinga - Feed Your Mind. Wayne Duggan , Benzinga Staff Writer.
August 13, 3: The Concept Of Crossovers The idea behind trading crossovers is that a short-term moving average above a long-term moving average is an indicator of upward momentum in a stock, and the opposite is true about a short-term average trading below a long-term average. Are There Better Numbers? View the discussion thread. Subscribe to our free newsletters:. Market in 5 Minutes. If you have any questions as it relates to either of the three newsletters, please feel free to contact us at ZING.
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