Another method to generate a trad signal is the so called double crossover, which uses two moving averages, in this case simple ones. For this signal generation method you take two moving averages with different timewindow sizes. When the SMA with the shorter timewindow crosses the longer one from down to up, it is seen as buy signal, if it crosses up to down that is taken as a sell signal.


				
					Two simple moving averages with DAX Index

Fig. 1 Two SMAs with DAX index

Figure 1 shows the DAX index, this time with two SMA curves, one with a timewindow of 150 days and the other one with 50 days. Because the SMA50 is much smoother then the DAX index, it produces less false signals by crossing the SMA150 through short time spikes (compare SMA Index crossover). In this chart are only 2 tradesignals given, one to sell at the start of the downswing and one at the upswing. Of course this method can have false signals too, and as you see the buy/sell signals are a bit late compared to the simple index crossover.