Double Moving Average

 

#trendfollowing #movingaverage #crossover 

Inventor:  

Two moving averages of different speeds on one chart. The fast one follows recent price, the slow one shows the bigger trend. When the fast average crosses the slow one, the trend has likely changed. The famous 50/200 crossover is called the Golden Cross (up) and Death Cross (down). 

Default period: 5, 3 

Fast average above slow average indicates uptrend. Fast average below slow average indicates downtrend. 

Useful readings: 

Fast crosses above slow: Trend turned up (Golden Cross on 50/200) 

Fast crosses below slow: Trend turned down (Death Cross on 50/200) 

Gap between averages widening: Trend getting stronger 

Gap narrowing: Trend tiring, possible cross ahead 

Price between the two averages: Transition zone, wait 

Many crosses in a short span: Choppy market, crossovers unreliable 

Objective rules: 

Bullish: Fast MA crosses above slow MA. 

Bearish: Fast MA crosses below slow MA. 

Entry filter: Take the crossover only if price also closes on the same side of both averages 

Long exit: Fast MA crosses back below slow MA 

Chop filter: Skip signal if the last cross happened within 10 bars 

What makes it unique: 

Its crossovers – the Golden and Death Cross – are the most famous mechanical signals in finance. Two lines create what one cannot: an objective, dated trend-change event.

The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.

This indicator is also available in the System Builder on RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

Default period: 10 , 20

Default period: 20 , 40

The indicator is applicable to all types of charting. It is calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin-Ashi charts, and lines on Kagi charts. While the formula and reading of the indicators remain the same, they become more dynamic on these charts.