| Securities Trading Based on a Triple Moving Average Crossover |
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When trying to make a decision on whether to buy or sell a particular security, the triple moving average crossover can often provide partial guidance. As one of the most basic technical indicators, this technical indicator can provide a buy or sell recommendation based on the direction of the crossover, allowing traders to open or close positions accordingly.
When trying to make a decision on whether to buy or sell a particular security, the triple moving average crossover can often provide partial guidance. As one of the most basic technical indicators, this technical indicator can provide a buy or sell recommendation based on the direction of the crossover, allowing traders to open or close positions accordingly. What is a Moving Average (MA) A moving average shows the average value of a stock (or other security) over a period of time. Since moving averages are based on past prices, the crossover is based on lagging data. We can create moving averages for short, medium and long periods, the decision is up to the analyst. For this reason, Triple MA Crossovers work well in a clear-trending market, but not so well in sideways markets. Understanding the Triple Moving Average Crossover Using short, medium, and long moving averages, the analyst will plot all three on a chart. The indicator will give an indication as to the future direction of a security when it triggers a buy or sell signal. This happens when the short moving average crosses over the medium, and the medium crosses over the long moving average. The most popular and possibly reliable applications will see analysts using the 4-day, 9-day, and 18-day moving averages. To illustrate further, this case would see the 4-day moving average cross over the 9-day, and the 9-day cross over the 18-day. With all three moving averages crossing, the analyst can make a recommendation on the position. Trade Signals From the Triple Moving Average Crossover Quite simply, a bullish signal is triggered when the three moving averages cross an upward sloping trendline, and a bearish signal is triggered when the averages cross a downward sloping trendline. When the crossover occurs, or is about to occur, the analyst will make a firm recommendation or a conditional recommendation to buy or sell. Making decisions on current or prospective positions should rarely be based on a triple moving average crossover by itself. It is strongly recommended that analysts and investors confirm or refute the signal by reviewing the MACD (moving average convergence-divergence) and Momentum before entering or exiting a position based on technical indicators such as this. Since reviewing multiple technical indicators and signals can become a full-time job for dozens of analysts, many traders can benefit from the assistance of trading software, which can compute thousands of complex signal on a daily basis and return simple buy or sell recommendations. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Chris Blanchet is a technical analysis and options contributor to the online trading reviews site, Online Trader Today.com, where you can obtain a free e-book on Option Sensitivitiesl. As well, he maintains a Debt-Free Blog at How To Repay Debt.com. |