Bars Since MA Cross Can Help Trend Following

17 thg 11, 2022

Moving average crosses are popular signals for trend followers. Like many conditions, they tend to reverse after a certain amount of time. Today’s script is designed to help traders visualize and interpret these turns.

Bars Since MA Cross counts how many bars have passed since a fast-moving average crossed a slower MA. Bullish readings, with the faster MA above the slow, are plotted with positive numbers. The opposite is true for bearish conditions. Users can choose between simple, exponential and weighed average types. They can also mix them, comparing a fast EMA for a slower SMA, for example.

By default, it uses the 8- and 21-day EMAs.

This approach can help in a couple of ways. First, it can show divergences as a move weakens. Microsoft, in the example above, had a shorter bullish phase as it made new highs last December. This was followed by even briefer periods in January before the bear market took hold.

Likewise in May and June, Bars Since MA Cross showed shorter bearish periods before July’s counter-trend rally.

The second potential application is to know the age of a move. In this case look at September 2020. MSFT’s 8-day EMA was above its 21-day EMA for 108 days. The chart shows this was unusually long by previous examples, giving traders a sense the rally was getting long in the tooth. (MSFT would go the rest of that year without a new high.)

In conclusion, Bars Since MA Cross judges a move by its age and not its intensity. It’s a different approach that can sometimes help more than viewing simple price action.

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