Moving Averages Crossover Signals - Enter when the 5-day EMA crosses the 20-day EMA.
- Enter when the 5-day SMA crosses the 50-day SMA.
- Enter when the 10-day SMA crosses the 100-day SMA.
- Enter when the 20-day SMA crosses the 200-day SMA
- Enter when the 50-day SMA crosses the 200-day SMA.
- Exit your mutual funds and go to cash when SPY price crosses under its 200-
day SMA.
- Exit your mutual funds and go to cash when SPY price crosses under its 250-
day SMA.
- When trading stocks it is usually a smoother equity curve to use these
crossovers systems as long-only systems.
While few systems can be built with single moving averages alone, they can be
used as a tool used for filtering and trading trends in your timeframe. They work
best as crossover systems where you make entry and exit decisions when a
shorter term moving average crosses over a longer term one, or you use the 200-
day SMA as a filter and take long signals above that line or short signals below
it. Using a loss of the SPY 200-day SMA to exit your stock mutual funds in your
retirement account can dramatically reduce your drawdowns during bear
markets.
- 5-day EMA: Measures the short-term time frame. This is support in the
strongest uptrends. This line can only be used successfully in low volatility
trends.
- 10-day EMA: “The 10-day exponential moving average (EMA) is my favorite
indicator to determine the major trend. I call this ‘red light, green light’ because
it is imperative in trading to remain on the correct side of a moving average to
give you the best probability of success. When you are trading above the 10-day,
you have the green light, and you should be thinking buy. Conversely, trading
below the average is a red light. The market is in a negative mode, and you
