# Moving average crossover: a strategy to learn and test | DT Academy > Trade when a fast moving average crosses a slow one, in the new direction. [Strategy Library](https://www.thedtterminal.com/academy/strategies) Trend # Moving average crossover A fast average crossing above a slow one marks a possible uptrend, and crossing below a possible downtrend. It is trend following: it tells you the direction now, late, rather than predicting it. The classic pair is the 50 and 200 day (the golden cross and death cross). Beginner Indices, crypto, forex, gold Any session; most often daily charts H4, D1 [Use this strategy](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_use&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fmoving_average_crossover) [Practice it](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_practice&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fmoving_average_crossover) Example 01 ### Moving average crossover on a chart BTCUSD · D1 Bullish cross decline, cross, trend Low: 36,73150 crosses 200: 41,868Entry, on the close: 45,024Days after the low: 64Sample candles, not market data The signal came only after the candle closed with the fast line above the slow one, well after the low. That lateness is the price of the rule. ### The rules Setup Choose one pair of averages and one type, for example the 50 and 200 SMA on the daily chart Entry Enter after a candle closes with the fast average above the slow one (below it for a short) Stop Out on the opposite cross, or on a close beyond the faster average, as your written rule says Target None: a crossover system exits on its exit signal, not at a target Manage Act only on closed candles, never on a cross that appears and vanishes mid-candle ### Common mistakes - Trading crosses in a sideways market. With no trend, crossovers give many false signals in a row. - Expecting early entries. Crosses come late by design: the move has started before the signal. - Judging it on a few signals. A daily 50 and 200 cross happens rarely, so a short test says little. - Treating it as advice to buy. Sources say a cross alone is not a reason; check it with your other rules. ### When it's off - Skip it when the averages are flat and bunched together - Expect losses when the averages cross back quickly (a whipsaw) ### Words to know Moving average The average closing price over a set number of candles, drawn as a line; the exponential version (EMA) weights recent candles more than the simple one (SMA). Traders use it as a trend filter or as a moving level for pullbacks. Moving average crossover A signal when a faster moving average crosses above (bullish) or below (bearish) a slower one. The golden cross and death cross specifically mean the 50-day crossing the 200-day. Whipsaw Quick crosses back and forth that stop you out again and again. Lag The delay an average has because it is built from past prices. When you make it yours, I'll ask what the rules above leave open. Start with one of these: - Which average type and lengths do you use, and why those? - Do you act on the candle close or as soon as the lines touch? - What keeps you out of sideways markets? [Ask Edge in DT Terminal](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_question&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fmoving_average_crossover) ## From DT Academy - [Market structure](https://www.thedtterminal.com/academy/market-structure) - [Backtesting your trades](https://www.thedtterminal.com/academy/backtesting-your-trades) ## What testing exists Older studies found moving average rules made money on stock indices, but the results weaken once you correct for data mining, trading costs and more recent data. ## Before you trust a backtest - Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%. - The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test. - Include spread and commission, and practice on dates you have not looked at, before you trust a result. ## Sources - [Moving averages: simple and exponential (opens in a new tab)](https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-overlays/moving-averages-simple-and-exponential), StockCharts ChartSchool - [Moving average trading strategies (opens in a new tab)](https://chartschool.stockcharts.com/table-of-contents/trading-strategies-and-models/trading-strategies/moving-average-trading-strategies), StockCharts ChartSchool - [Trading using the golden cross (opens in a new tab)](https://chartschool.stockcharts.com/table-of-contents/trading-strategies-and-models/trading-strategies/moving-average-trading-strategies/trading-using-the-golden-cross), StockCharts ChartSchool - [Moving average stock signal (opens in a new tab)](https://www.fidelity.com/viewpoints/active-investor/moving-averages), Fidelity Viewpoints - [Moving averages and trend trading (opens in a new tab)](https://www.ig.com/au/ig-academy/charting-essentials/moving-averages-and-trend-trading), IG Academy - [Simple technical trading rules and the stochastic properties of stock returns (Journal of Finance, 1992) (opens in a new tab)](https://ideas.repec.org/a/bla/jfinan/v47y1992i5p1731-64.html), Brock, Lakonishok and LeBaron - [Data-snooping, technical trading rule performance, and the bootstrap (Journal of Finance, 1999) (opens in a new tab)](https://econpapers.repec.org/RePEc:bla:jfinan:v:54:y:1999:i:5:p:1647-1691), Sullivan, Timmermann and White - [What do we know about the profitability of technical analysis? (Journal of Economic Surveys, 2007) (opens in a new tab)](https://ideas.repec.org/a/bla/jecsur/v21y2007i4p786-826.html), Park and Irwin - [Controlling risk (opens in a new tab)](https://www.ig.com/en/ig-academy/money-management/controlling-risk), IG Academy - [Forex risk management (opens in a new tab)](https://www.cmcmarkets.com/en-gb/forex/forex-risk-management), CMC Markets - [Pseudo-mathematics and financial charlatanism (Notices of the AMS, 2014) (opens in a new tab)](https://scholarworks.wmich.edu/math_pubs/40/), Bailey, Borwein, López de Prado and Zhu - [What is backtesting? (opens in a new tab)](https://www.ig.com/uk/trading-strategies/what-is-backtesting-and-how-do-you-backtest-a-trading-strategy--220426), IG DT Academy is education, not financial advice. Nothing here is a recommendation to buy or sell any instrument. Trading carries a high risk of losing money, and past results, examples and backtests do not guarantee future results. 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