InvestorQ : What exactly is a moving average cross over and how is it interpreted by chartists?
indhumathi Sayani made post

What exactly is a moving average cross over and how is it interpreted by chartists?

Answer
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shrinidhi Rajan answered.
1 year ago


Let us say you are looking at two different simple moving average lines viz. the 50-day SMA and the 200-day SMA. The 50-day SMA is the short term moving average line while the 200-day SMA is the long term moving average line. Now, if the short-term SMA line rises above the long-term SMA line, you should buy stocks because it means the trend is going upward. That is because the short term trend shows signs that the momentum is strongly in favour of the stock and that is a clear buy signal. On the other hand if the short-term SMA line (the 50-day line in this case) falls below the long-term SMA line (the 200-day line in this case), you should sell your stocks because it means the trend is going downward.