Moving-average crossover
What does it mean when a short-term price average crosses a long-term one, and why does the signal arrive late?
In plain words
A moving-average crossover is when a line tracking recent prices crosses a line tracking longer-term prices. When the short line moves above the long line, the signal reads as upward; when it falls below, as downward. It summarises a change in direction rather than predicting it.
Why it matters
Crossovers are used as trend signals: a short average above a long one is read as rising prices, below as falling. Because both averages are built from past prices, the cross can only happen after prices have already turned, so much of the move may be gone before the signal appears.
In a real week: ETH, week of 3 June 2019
ETH entered the week of 3 June 2019 after four straight up weeks (15.37%, 37.99%, 1.96%, 1.71%) and reached a high of 270.00 at 03:00 UTC on Monday. Prices then slid, closing the week at 230.98, down 14.09%, in the lower third of a 19.17% range, with the low of 226.56 at 22:00 UTC on Sunday. A short average would only cross below a long one well after the week's high had passed.
A common mistake
Treating a crossover as an early warning of a turn. It confirms a direction that has already begun, so it often arrives after much of the price change has occurred.