im not a great fan of moving averages as an indicator alone for obvious reasons , though ive just seen a simple strategy regarding moving averages, Its using the MV with exponential MV when they cross over basically go long or short. it stated this on the 4 hour time frame , is this possibly a good signal for an entry
MA crossovers are a poor entry signal as they are always late in comparison with the development of the price movement. This means that e.g. long entry on a bullish crossover must miss a portion of the potential price rise, plus it can even occur and signal an entry when price action has already turned bearish.
The defects are doubled if you use a bearish crossover as the exit signal.
Using MA’s to confirm trend direction and comparative strength is however an excellent use of a simple objective TA tool.
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thanks for your feedback appreciated , yes its what i originally thought , i just brought this point up because this guy was using ex ma with the standard moving average
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Personally i find ma’s an excellent means of defining entries - and have done for many years without ever losing faith in them.
Actually, the fact that they require the market to have already started to move can often avoid nasty whipsaws arising from premature entry.
However, i would NEVER also rely on an ma crossover for exits. Moves tend to end far quicker than the build up stage and waiting for a crossover will often eliminate a big chunk of profit or even reverse into a loud.
The reason why my view differs a bit from @tommor is that he looks at longer term daily ma’s whilst i tend to focus on shorter term 4h/1h timeframes. Naturally, crossovers on daily charts do lead to bigger movements before they cross.
So the answer depends a lot (as usual) on what kind of trading you are interested in.
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yes also great points, dose ex moving average crossing over ma have any weight ??? i believe ex is more recent
The SMV is a simple mathematical average of a given number of values whereas the exponential gives a greater weighting to the most recent value and progressively less to the earlier values.
Therefore the EMV is quicker to react to current price changes. However this can be a double-edged sword of the signal comes too soon using an EMA that is to short in terms of number of values.
Why do you say:
ive mention this because as a beginner im still browsing through you tube feeds , this guy states he “using” the cross over as a strategy for entries alone on a four hour time frame.i was wondering if it has a success rate, i understand lots of other variables come into the outcome
I believe it certainly can work as an entry basis but, as you say, there are many considerations to take into account. Two examples:
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A crossover could be triggered by one excessively large candlestick arising from a sudden unexpected piece of news, but the market then absorbs it and quickly reverts to its former level - leaving you high and dry!
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by definition, two different value MAs will always be on one side of each other or the other. So in quiet markets you may experience a series of painful whipsaws while the market actually is going nowhere!
@greenscorpio, You will tend to get a smoother EMA result off chart in the form of an oscillator as shown below. It allows for a much cleaner chart and defines clearer market movement.
Above - HK50 (Hong Kong 50) 4H Chart EMA 14 (Purple) v. EMA 200 (White)
Above - HK50 (Hong Kong 50) 1H Chart EMA 14 (Purple) v. EMA 200 (White)
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I am not a great fan of crossover trading strategy but I am using EMA21 on my trading chart!
oh sorry yes because im a short term trader , i use them in bollinger bands , scalping, day trading ect , as with support and resistance levels they useful , the do tend to lag though
yes so true
This is what I was waiting for! 
The brief answer is, yes, of course they lag current price - because that is their purpose and what they are designed to be! They provide a means to compare what price has, in general (i.e. on average), been doing in the recent past with what price is doing now, in real-time.
Without that comparative set up it is very difficult to decide what might be happening right now. As we all know, price moves up and down all the time and unless we can wrap some structure around it, we will just end up chasing it. E.g. When we get a down candle or series of down candles in an otherwise existing uptrend, how can we tell whether it is an excellent buy opportunity or the time to close out our long positions? But, naturally, MA’s are only one means of trying to achieve this. PA methods are another.
This is the same process whether one is just using MA’s or PA analysis, or both. We need to be able to create reference points where we can make sensible decisions - and there are many ways of doing this.
So, yes, MA’s lag. But that is not a negative, it is a positive quality that is used to provide us with comparative information about what is going on within the overall price movement.
As @tommor said above:
This is true - and of course there are many other ways of establishing this including the PA toolbox.
thanks for your explanation
I have very bad experience on moving average crossover trading system, although I tried for a long time by many parameters!
yes i suppose its just piece of the jigsaw , i just found using the ma with the exponential, a less promoted strategy so i was abit more intrigued i guess
anyhow it looks like it could be a promising day for the rangers
Did this also include exiting on crossovers?
No; I tried so honestly then I found only crossover based strategy isn’t enough here!
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Yes, I fully agree with you.
If one considers the modern computing power of major institutional investors, then it is obvious that they could, and would, have backtested just about every combination of every MA type as crossovers, across every timeframe imaginable.
If only one of those combinations worked then they would need nothing else! But that is clearly not the case!
So, no, just a crossover strategy is not going to work consistently over time.
The problem with these is that is it a simple matter to “curve-fit” a combination of MA’s to fit a particular sample of price history but it will no longer function whenever the market movement profile changes - as it does on an ongoing basis, of course! But a salesman will only promote the curve-fitted sample!
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