Moving averages are among the oldest and most used indicators used by scores of traders. Long before fancy indicators and algorithmic trading existed, traders trusted moving averages to identify trends and turning points in the market.
One way traders use moving averages is by spotting MA crossovers to spot a reversal in trend and take positions accordingly. This is what we are going to discuss in this post. As we move ahead with the post ,we would also discuss two specific crossovers called- A golden crossover and death crossover.
Let's begin.
What is a Moving Average (MA) crossover?
A moving average crossover happens when a faster moving MA (short term MA) crosses above or below a slow moving MA (longer term MA). A bullish MA crossover happens when the faster moving MA crosses above a slow moving MA and a bearish MA crossover happens when a faster MA crosses below the slower MA.
For example, A 20 period MA crossing above a 50 period MA is a bullish crossover (20MA is faster and 50 MA is slower) and 20 MA crossing below 50 MA is bearish MA crossover. This is shown in the chart below.
Why is moving average crossover important?
An MA crossover depicts a shift in trend. A bullish MA crossover depicts a shift of trend from downtrend to uptrend, and a bearish MA crossover suggests a trend change from an uptrend to downtrend. This is why traders construe this to be a buy or a sell signal, respectively.
So, a bullish MA crossover is a buy signal while a bearish MA crossover is a sell signal.
Let's see this in a chart.
A word of caution here: there are certain instances where these signals fail, like in a sideways market, so don't use MA crossovers as a sole signal to enter or exit a trade. Always pair it up with other indicators and price action to execute a trade based on MA crossover.
Choice of Moving average for MA crossover strategy-
One question that traders frequently ask about the MA crossover strategy is, which MAs they should use to get buy and sell signals?
While there is no one size fits all answer to this, however, frequently used MAs combinations are MA20- 50, MA50- 200. Many short-term traders use a combination of MA 5-11 as well.
The best thing to do is test some combinations based on your trading style and choose one that works for you.
What is a golden cross?
A golden cross is a specific kind of bullish crossover, when a 50 period MA crosses above 200 period MA. This crossover depicts a longer term shift in trend from a downtrend to an uptrend. Many traders take buy entries or plan a buy entry after a golden crossover.
What is a Death cross?
A death cross is a specific kind of bearish crossover, where a 50 period MA crosses below 200 period MA. This crossover depicts a longer term shift in trend from an uptrend to a downtrend. Traders sell or plan to take a sell entry after a death cross.
Drawbacks of moving average crossover strategy-
One of the drawbacks of MA crossover is, they don't work in sideways market. In a sideways market the faster MA keeps crossing above and below the slow MA causing frequent losses to the traders.
Another drawback of this strategy is late signals. Frequently when a bullish crossover occurs, the market has already moved a big way up leading to a wider stoploss placement or losses. So, if you notice market has already moved up when crossover happened, then don't enter rightway after the cross rather wait for a pullback and enter near the low.
Final Thoughts
Moving average crossovers, including the Golden Cross and Death Cross, are simple yet powerful tools for understanding trend direction and market bias. They help traders align their trades with the broader trend rather than fighting it.
However, like any indicator, MA crossovers are not foolproof and work best when used as a trend-confirmation tool rather than a standalone entry signal. When combined with price action, market structure, volume, or momentum indicators, they can significantly improve trade quality and decision-making.
The key is to understand when to trust the crossover and when to stay cautious—especially during sideways or overextended markets. Used with patience and proper risk management, MA crossovers can become a valuable part of any trader’s technical analysis toolkit.
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