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Glossary · Indicators

Crossover

The moment one line crosses another — such as a fast moving average crossing a slow one, or MACD crossing its signal line — used as a signal.

By Sky Trade editorial teamUpdated

A crossover is a simple, rule-based event: line A crosses line B. The classic version uses two moving averages. When the faster one (say EMA 9) crosses above the slower one (EMA 21), it is a bullish crossover; a cross below is bearish. On daily charts the 50/200 SMA crosses are known as the golden cross and the death cross.

Crossovers appeal because they remove guesswork. But they inherit the lag of the averages they are built from: in a clean trend they arrive after a good part of the move, and in a range they flip back and forth, producing strings of small losses. Neither is a bug; it is simply what crossing averages do.

Ways traders tame crossovers:

  • act on them only when a trend filter, such as ADX above 20–25, says the market is trending;
  • require a candle close after the cross;
  • use the cross to define direction and something else for timing.

The same logic applies to MACD signal-line crosses and to Stochastic %K/%D crosses. In the Sky Trade terminal you can overlay two moving averages and watch them interact. See moving averages: SMA and EMA.

Example

On M5, EMA 9 crosses above EMA 21 at 1.2655 on GBP/USD. In a trending morning a 20-pip rise follows; the same setup in the afternoon range flips three times in an hour.

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