How to use Cross rule
What is Cross Rule
The Cross Rule is a basic trading rule used in technical analysis that can be applied to any two indicators. It works by observing the crossing points of these two indicators and using them as potential trading signals.
The first step is to identify two indicators that may be suitable for the specific market and timeframe being analyzed. These indicators could be anything from moving averages to momentum indicators, or any other technical analysis tool. The important thing is that they are suitable for the market and timeframe in question.
Next, the trader will observe the crossing points of these two indicators. When the two indicators cross over each other, it is considered a potential trading signal. The direction of the trade will depend on the direction of the cross. For example, if the first indicator crosses over the second indicator from below, it could be seen as a bullish signal and a potential buying opportunity. Conversely, if the first indicator crosses over the second indicator from above, it could be seen as a bearish signal and a potential selling opportunity.
It is important to note that the effectiveness of the Cross Rule may vary depending on the specific indicators used and the market conditions. It is also important to use proper risk management techniques and to consider other analysis methods in addition to the Cross Rule when making trading decisions.
Overall, the Cross Rule is a simple yet powerful tool that can be used by beginner traders to identify potential trading opportunities in the financial markets.
How to use Cross Rule in the Strategy Builder
You can find the Cross Rule in the Math area, on the right side. Just drag it in the condition you want to use.
Change parameters of the Cross Rule
The rule can be used on any indicator.
Click on the Cross Indicator inside the condition. A popup appears and you can change the following parameters:
This is the tick interval the Cross will evaluate. The default is 1 day.
This is the indicator that goes below. Eg: in the MACD with MACDSIGNAL cross example below, this shows that MACDSIGNAL goes below the MACD - hence a bullish momentum.
This is the indicator that goes above. Eg: in the MACD with MACDSIGNAL cross example below, this shows that MACD goes above the MACDSIGNAL.
MACD with a MACDSIGNAL cross
Golden cross: EMA 50 crosses EMA 200
Conversely, if you want to use this on other crosses, like a golden cross, just change the Crossing Under to be the EMA of 200 lengths and Crossing Upper to the EMA of 50 lengths.
You can do this by selecting Exponential Moving Average in the Crossing Under and Crossing Upper select box (highlighted below).
Then click on each EMA in the breadcrumb to set the parameters.
If an Indicator has internal indicators, the breadcrumb is where you set the parameters for each of the indicators that form the Main Indicator.
In our example, the breadcrumb is: Cross ( EMA ( ClosePrice ) , EMA ( ClosePrice ) )
- For Crossing Upper EMA set 50 as Length
- For Crossing Under EMA set 200 as Length
Repeat the steps for the EXIT condition, dragging the Cross Indicator, setting the parameters properly so that Crossing Under is EMA 50 and Crossing Upper is EMA 200.