Today I will talk about the market situation, knowledge of which will allow you to close the trade on time, and at the same time make good money. The Death Cross in Trading has been used by experienced traders for a long time. Such a formidable name is due to the fact that a certain intersection of two lines of a known indicator can indicate the “death” of the current trend in the market and the formation of a new trend. We are talking about SMA lines with periods 200 and 50. If the SMA (50) crosses the SMA (200) in the upstream direction from top to bottom, which means there’s a cross of death on the chart. It indicates a high probability of ending the current trend and starting the downward movement. In other words, the cross of death in trading warns of a bear market. Example of this market situation:
Signal strength cross death in trading
Do not think that the crossing of MA lines is enough to be sure of the upcoming long-term market decline. This signal may also be false. As and when using any other signal to enter the market, it is necessary to wait for its confirmation. You can use any trend indicators or oscillators to do this. An effective way to assess signal strength is to track the volume of trading. Of course, in the forex market, doing this is not easy. But still such an opportunity exists. If the price drop after crossing moving averages is accompanied by an increase in trading volume, then such a cross of death in trading is considered real, and the signal is strong.
Lag
Unfortunately, the formation of the cross of death sometimes occurs with lag. Many indicators have this drawback. What can be done about it? I see two options. You can take it as a given. Delay will lead to the loss of part of the profit. Some traders are doing differently. They consider the cross of death an intersection at the cost of the SMA (200) line from top to bottom. In this case, of course, you can close the purchase deal with less losses and enter the sale at a better price. But also risks will also be higher. Which of the options to choose is to decide for you. I also want to say that the periods of moving averages 200 and 50 are not the only condition. Sometimes traders use periods 100 and 30. You can test both options on a demo account and choose the most effective of them. The Cross of Death is used in long-term trade. It is well worked out in both the foreign exchange and stock markets. Inga Fedorova 06.11.2021 Entry Cross of death in trading first appeared forex-for-you.ru.