The triple moving average crossover is one of the most basic and often used technical indicators available to traders who want to determine whether to go long or short on a particular security. Can this indicator give such a signal? Absolutely. Depending on the direction of the crossover, either a buy or sell signal will be generated.

What is a Moving Average A moving average draws out the average price of a specific security over a period of time. For example, a 4-day moving average will take the average security price over the past four days and draw it on the chart. Over time, this creates a trend-line. Since moving averages are based on historical data, they lag behind current stock prices. The nice thing about moving averages, however, is that short, medium and long terms can be used at the discretion of the investor or analyst, which makes them great indicators in clear-trending markets, although not so reliable in choppy, sideways markets.

Triple Moving Average Crossovers Defined As a technical indicator, the triple moving average crossover gives the trader an indication of the future direction of that security. It uses a short, medium, and long moving average and the signal is triggered when the short moving average crosses the medium, and the medium moving average crosses the long moving average. For most applications, analysts rely on 4-day, 9-day and 18-day moving averages for this indicator.

In this case, the 4-day would cross the 9-day and the 9-day would cross the 18-day. Since all three cross, a technical indicator is triggered and the investor is advised to make a trade.

Trading the Triple Moving Average Crossover When the moving averages cross over one another in an upward fashion, then a bullish signal is generated. This would be an indication to purchase the security (long). Likewise, when the moving averages cross in a downward trend, traders are urged to sell the security (short).

Making decisions on current or prospective positions should rarely be based on a triple moving average crossover by itself. It is strongly recommended that analysts and investors confirm or refute the signal by reviewing the MACD (moving average convergence-divergence) and Momentum before entering or exiting a position based on technical indicators such as this.

Since reviewing multiple technical indicators and signals can become a full-time job for dozens of analysts, many traders can benefit from the assistance of trading software, which can compute thousands of complex signal on a daily basis and return simple buy or sell recommendations.

With more than 16 years of experience as a financial advisor, Chris has helped many people with Investment Management matters. He strongly recommends that people looking for areas Where To Invest consider mutual funds.

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