MOVING AVERAGE CROSSOVERS

Let's talk about the Golden Cross and the Death Cross. No, we're not opening a deck of cards and telling your fortune. These colorful terms refer to patterns you probably use every day in your trading but don't refer to by these names. Along with its many cousins, they comprise a whole division of technical analysis. You might know them better as moving average crossovers.

Moving averages emit vital market data, but all of them exhibit one common limitation: They lag current events. By the time a 20-bar average curves upward to confirm a trend, the move is already underway and may even be over. While faster incarnations (such as exponential averages) will speed up signals, all of them ring the trading bell way too late.