As you can see in Figure 1, a cross below a moving average can signal the beginning of a downtrend and would likely be used by traders as a signal to close.
Moving average crossovers are a popular strategy for both entries and exits. MAs can also highlight areas of potential support or resistance.
Moving average crossover of a day exponential close-price MA (red) crossing over a day exponential close-price MA (yellow). In the statistics of time series, and in particular the analysis of financial time series for stock.
If the ATR stop is used, the system will exit the market when that stop is hit. If the ATR stop is not used, the Dual Moving Average Crossover system does not.
A popular use for moving averages is to develop simple trading systems based However, an exit strategy based on the moving average crossover would have.
In Part Two of our interview with Jim Rohrbach of Investment Models, the longtime trader describes his strategy for using moving averages.