Crossing Moving Averages

I want to go over moving averages and what it means when they cross each-other's paths...I won't explain moving averages because the word is linked to an attachment that will give you a very good explanation on what they are. I want to focus on the phenom of crossing moving averages or MA and what that means for traders and how you should approach your entries or exits based on them.

I will use the NZDJPY on a 60min time frame as my example:
On the chart we can observe the Slow MA crossing under the Fast MA which is circled in white and labeled 1. This is a signal that the price of the instrument is ready to make a move higher and/or the trend is ready to change; but because all indicators are lagging we also see that the jump happened some hours before the indicator could show it. Normally a trader might consider this the signal for he or she to jump in the trade long but if we are patient we see that this is a 52-fake-out. For this to be a true trend change we would need to see candles come back down into the Fast MA for a test; after the test the price should close above the MA and move on to continue higher with both Moving Averages under the candles and the Slow Moving Average should remain underneath the Fast Moving Average until another crossover...

 Which leads me to the second half of this lesson.

The second crossing of the Moving Averages on the chart above circled in white and labeled 2 is the reverse of what I explained in the first paragraph. When the Slow Moving Average crosses over the Fast Moving Average we want to see candles comeback up to test the Slow Moving Average but close below it and continue lower; as we observe in the first blue highlighted box (10/14) where a beautiful Doji Candle was posted right at the Slow MA and then a gorgeous tumble down came next. A sell at this point is the proper way to trade a Moving Average Crossover.

Though they are easy to spot, it is very easy to be fooled and trapped into a position which can presenting false signals which is what we observed in the first demonstration of an MA crossover. Be patient and let the trades come to you; more so, know and accept when you're wrong. Don't let a lagging indicator be the reason why your account balance suffers.