X Mark the spot. This couldn’t be more true for technical analysis. In many systems, line crossing is the trigger to enter, and also exit a trade. Here I will list down few of the more common one. Maybe this will give you idea in developing your own trading system.
EMA/SMA Lines cross
This should be the most famous trigger method. The trigger happens when a faster EMA (or SMA) line cross the slower one. And the exit usually when the lines cross in opposite direction. One famous example is the 5-13-62 system by Rob Booker. The system triggers enter condition when the 5EMA crosses the 13EMA. Another famous example is the 50EMA crosses the 200EMA.
Price crosses EMA line
This is another trigger similar to above one. The trigger happens when the price cross the EMA line. Example is the “5-minute-momo-trade” method I discussed some times ago. In this method false breakout are more frequent compare to above method. Confirmation with candle sticks pattern will bring more accuracy.
MACD / Signal line cross.
I have discussed this in my previous post about MACD. The buy/sell trigger happens when MACD cross above or below the signal line. The signal line is 9EMA of MACD, which move slower then the MACD line. When the MACD crosses above the signal line, its indication of uptrend. Confirmation with zero line crossing on MACD and other indicators are needed to make a good entry.
Stochastic line cross
The slow line and fast line in stochastic cross is good indication of trend turning. When the fast %K line cross above the slow line, it is one of the buy signal. But use this alone is not a good indication, confirmation with other indicators are needed to enter a trade.
Momentum line cross
I just learn this not long ago. It’s really amazing when I first saw it. Using 2 momentum lines in one indicator window. When the line with smaller period cross the longer period line, its good signal to trigger the trade. The system I saw actually uses 2 windows; one with 10 and 14 period momentum line, the other with 1 and 5 period momentum line.
RSI line cross.
I have yet to experiment with this. The idea is putting 2 RSI line in one indicator windows. The period of RSI is one shorter and one longer. When the shorter period RSI cross the longer period one, it is signal to enter a trade.
There are many other possible combination out there. The above are few that I just learned. Feel free to leave your comments here.
