A price break upwards through an MA is generally a buy signal, and a price break downwards through an MA is generally a sell signal. As we have seen, the longer the time span or period covered by an MA, the greater the significance of a crossover signal.

If the MA is fl at or has already changed direction, its violation is fairly conclusive proof that the previous trend has reversed.

False signals can be avoided by using a filtering mechanism. Many traders, for example, recommend waiting for one period – that is one day for daily data and one week for weekly data.

Whenever possible try to use a combination of signals. MA crossovers that take place at the same time as trend line violations or price pattern signals often provide strong confirmation.