Three moving averages on a chart can visually show traders both the direction of the long term trend and whether the short term trend still has momentum in the same direction. Three moving averages simply show the current direction of momentum on a chart and can be used to create good risk/reward ratios at entry through the use of stop losses, trailing stops, and profit targets. The 30-day ema can be used to signal a value zone on the chart for potential reversion to the mean trades when price gets too far extended from this line stretched too far like a rubberband the odds that it will eventually snap back. The 10/30 day EMA and 10/50 day EMA crossover signals can be backtested on charts to create mechanical entry and exit signals. The three moving averages can be used together as filters for price action showing the best entries and exits to go with the flow of the current momentum and trend on the chart. The 10-day EMA crossing below the 30-day EMA above the 50-day EMA can be a potential signal of a reversal in the longer term trend from up to the beginning of a new downswing in price. The 10-day EMA crossing over the 30-day EMA below the 50-day EMA can be a potential signal of a reversal in the longer term trend from down to back to an uptrend. The 10-day EMA crossing below the 30-day EMA below the 50-day EMA is a possible short selling signal. The 10-day EMA crossing over the 30-day EMA above the 50-day EMA is a potential long entry signal. Price under all three moving averages is a strong confluence showing both a downtrend and falling momentum in all three time frames. When the 50-day EMA is above both the 10-day and 30-day the chart can be considered to have lost short term momentum, if price falls below the 50-day EMA then that is a signal that the longer term uptrend is reversing into a possible downtrend. Price over all three averages is a strong confluence showing both an uptrend and rising momentum in all three time frames.
50-day EMA filters for the longer term trend.The three moving averages we will look at are the 10-day EMA, 30-day EMA, and 50 day EMA. The 3 moving average crossover strategy is a technical trading technique that uses three exponential moving averages of different time lengths to create signals on a chart.