Member-only story
A New Way To Trade Moving Averages — A Study in Python.
Another Way to Extract Trading Signals From Moving Average Crosses.
If I had a nickel for every possible strategy that can be formed around moving averages, I would be rich. The most basic form of technical indicators is the concept of a moving average. It is simple, quick, and effective in helping us with our trades and analyses. In this article, we will discuss the concept of crossovers from a different point of view.
We are familiar with the concept of having signals whenever a short-term moving average crosses a long-term moving average, however, if we want to extract more information from this technique, we can actually create an indicator that englobes more than one signal generation process. This indicator is very simple to calculate and understand. We will see it below in greater details.
I have just published a new book after the success of New Technical Indicators in Python. It features a more complete description and addition of complex trading strategies with a Github page dedicated to the continuously updated code. If you feel that this interests you, feel free to visit the below link, or if you prefer to buy the PDF version, you could contact me on Linkedin.
The Idea of Moving Average Crossovers
Moving averages help us confirm and ride the trend. They are the most known technical indicator and this is because of their simplicity and their proven track record of adding value to the analyses. We can use them to find support and resistance levels, stops and targets, and to understand the underlying trend. This versatility makes them an indispensable tool in our trading arsenal.
However, as statistics and common sense tell us, when something goes up, it must go down and therefore comes the idea of using moving averages as contrarian indicators rather than continuation indicators. With this in mind, we are interested in getting signals from crossovers that occur on…
