Depending on the direction of the crossover, a bearish or bullish signal can be seen when a security’s price crosses its moving average. Over time, the moving average allows the average value of the price to be found and the event in question occurs whenever the price crosses a moving average. In terms of price bars, there are three that are supported in 21, 50 and 200. If the price cross occurs on a longer moving average, this indicates a longer term signal which means that a reaction could be some way down the road still.
When the security’s price rises above its moving average, this is considered a bullish signal with the opposite being true for a bearish signal. Even when the crossover takes place, it is officially considered ‘not yet confirmed’ because this confirmation can only come after seeing the slope of the moving average. For example, the moving average will turn upwards if the event is bullish and downwards if bearish. If the moving average doesn’t slope at all or takes too long to move, it will be considered ‘never confirmed’.
Again, a simple moving average is used for this calculation which means that each price is given equal weight to calculate an average price over an extended time period. Exponentially smoothed averages and weighted averages are other types of moving average, but they are not supported here.