Hi team,
I want to avoid the below situations where crossover happens and then again it reverses. How to avoid these situations?
This phenomenon often occurs in a sideways market. To preempt such market conditions, one can employ indicators like ADX (Average Directional Index) or monitor the VIX (Volatility Index).
The ADX is a widely used indicator that helps assess the strength of a trend. When the ADX is low, it can indicate a weak or sideways market. Traders often look for the ADX to rise above a certain level, like 25, to confirm the presence of a trend and potentially avoid sideways markets. However, keep in mind that the ADX is not foolproof and can occasionally generate false signals.
The VIX, also known as the “fear gauge,” measures market volatility. Elevated VIX levels often indicate a higher degree of uncertainty and potential market turbulence. While not a direct indicator of a sideways market, a persistently low VIX might suggest a lack of market conviction and the potential for sideways or range-bound conditions.
Observing the price action, support, and resistance levels can also help identify sideways markets. In a sideways market, prices tend to move within a defined range, bouncing between support and resistance levels without a clear trend.
It’s often advisable to use a combination of indicators and analysis techniques to gain a more comprehensive understanding of market conditions. For instance, you can use ADX and VIX in conjunction with other technical indicators and chart patterns to confirm a sideways market.
A crossover with an angle less than 45 degrees is often considered to be less decisive and may be indicative of a more gradual or uncertain trend change.
Hello @ana_d
Please note that a signal will be generated whenever the conditions are true on the chart. Hence the situation where EMAs have overlapped can not be avoided.
However, as a workaround conditions can be created where a crossover has happened in the historical candle and the EMAs have not overlapped after crossover. You can refer to the below image to learn how to create the scanner conditions:
You can also refer to the scanner link here: https://scanners.streak.tech/scanner/crossover-failures
The above conditions will generate results when the EMA10 has crossed above EMA20 on the 5th candle previous to the current candle and the distance between the two is higher than 0 in the current and 4 candles previous to the current candle. You can decide on the historical candle where crossover should happen as per your requirement.
If you have any more queries you can ask here and I’ll be happy to help. Alternatively, you can also reach out to us at [email protected]