Translated from Russian by Google Translate
2 Сентябрь 2009

Crossover. Rules «Bull’s Cross» and «Bear the Cross»

There are various forex strategies, but those beliefs that came to me with the experience of trade show that any strategy to work more efficiently than it simpler. That is why today we’ll discuss the elements of technical analysis, which is known to all traders, but which has some features that may not know many investors - is moving averages.


These elements of technical analysis can form the so-called «Bull’s Cross» or «Bear Cross». I think that these kinds of situations encountered many traders, but because of their lack of knowledge could not be taken into account that, of course, lead to different consequences. At the base of the model incorporated elementary crossover.

One of the major drawbacks of moving averages is their excessive delay. How many times have I observed, however, like other market participants, as the moving average has just formed a steady upward trend, whereas in fact this trend has long been framed, and even coming to a close. It is these nuances and characterize moving averages. We can say that this is their sole, but the most significant drawback.

But the many advantages enjoyed by the moving averages, give an impetus to their use in many commercial systems. Various forex strategies often rely on precisely this element of technical analysis. Moving averages can be used in different contexts and with different components.

Characterize the crossover in more detail.

Since we are talking about the intersection, then, of course, assumes the use of several moving averages. The greatest impact of the use of CC can be obtained when used in conjunction with price patterns.

The first is the simplest strategy, for which I worked, was based precisely on the use of the SS, rather, signals from the intersection faster MOP slower. With regard to the parameters, which are set SS, then everything depends on the temporal range in which you execute a trade.

It is believed that sufficiently strong trading signals can be obtained at the intersection of the SS at key levels of support or resistance. With regard to the trading period, then you can get good returns when trading on the fluctuations in the range from one to three days. In this case, relations between the parameters, which are given MOP must comply with 3-fold difference.

As you can see, special importance is given to convergence / divergence of sliding averages. Also, be sure to consider the situation, which is observed on the market, with different time frames. For example, the daily trend may be rising, while to a 60-minute will be seen that the correction began. Of course, the more credible the SS with higher settings. With regard to the specific recommendations, I would recommend to be used for short-term trading CC with a period of 20 for the medium-term trading - 50 and for long-term trade - 200.

Moving averages can also be used as support and resistance levels. In this case, you must take into account the behavior of a moving average on the other. If a faster SS repeatedly repelled from the slower the SS, which is a level of support, it will say that we have a fairly strong level of support which can be viewed as an entry point into the market.

Since this article is intended to help understand what constitutes the phenomenon of «Bull’s Cross» and «Bear the Cross», then dwell on them in more detail. These phenomena are nothing like moving average crossovers. The only difference is that the intersection is the top down or bottom up. Through this intersection, we can conclude about the change of the overall market trends.

For example, when crossing the 50-day HS 200-day top-down, we can conclude that the market is coming changes and possible reversal of the downward to upward. This phenomenon is called «Bear Cross». In that case, if 50-day CC rises above the 200-day, it will serve as a signal that the market situation is observed «Bull’s Cross». After such a breakout 200-day SS become a key level of support, or a key resistance level.

Various forex strategies involve different use. But applicable to moving average can be applied similar rules. Many swing traders who trade on the oscillations can also use the testimony of moving averages. For example, it happens that with the period of the SS 50 and SS 200 with a period of long time do not cross each other. In this case, we have formed a kind of corridor. SS lines are support and resistance levels. Due to fluctuation of prices in this corridor and there is a great opportunity for short-term trading.

Another feature that should be taken into account when trading with the use of moving averages - this is the fact that the SS work only on the trend of the market sectors. When the lateral trend indications of moving averages are ineffective and can not be regarded as reliable. It is for this reason, many forex strategies differ in the mechanism of their use in relation to the definition of false alarms.

Typically, some traders prefer to simply switch to the use of different oscillators, while others are trying to create a variety of filters to detect trends in the formula, others simply rely on the graphical price models - the options can be much, but it is clear that completely renounce the use of moving averages inappropriate.