10/20 EMA Cross: a moving average crossover strategy

Updated

At a glance

Type
Trend · Swing trading: pullbacks and mean reversion
Holding period
About two days to several weeks; mean reversion two to about ten sessions.
Entry
10 EMA crosses above the 20 EMA, with the close above the 200-day SMA
Stop
Higher of the entry-day low and entry − 2 × ATR(14); at most 10% below
Exit
10 EMA crosses back below the 20 EMA; no target
Origin
A widely used rule with no single author.

An EMA crossover strategy turns two moving averages into a buy and a sell signal. When a fast average rises through a slower one, recent prices are climbing faster than the slightly longer trend, which is often how a new advance looks in its first days. When the fast average falls back below the slow one, that short-term push has faded and the trade ends. This preset uses the 10-day and 20-day exponential moving averages, a pairing many swing traders watch because it reacts within days rather than weeks.

On its own, a crossover fires wherever the price wanders, including inside downtrends, where most upward crosses are only brief rebounds. That is why the rule adds one filter: the close must be above the 200-day simple moving average, so the strategy buys short-term strength only in stocks whose long-term trend is still up. The stop is set on the entry day at the entry day's low or two ATRs below the entry, whichever is higher, and never more than 10% away.

Moving-average crossovers have no single inventor. Versions with longer averages, such as the 50-day crossing the 200-day (the golden cross), have been part of technical analysis for decades; faster pairs such as 9/21 and 10/20 are common in swing trading. The Academy lesson on moving-average crosses explains the idea step by step; this page sets out the exact rules Clear Tape runs and how to apply them.

10/20 EMA crossover: entry, stop and exitA price line above a rising 200-day SMA. The 10-day EMA crosses above the 20-day EMA, and the stock is bought at that close, with a dashed stop below the entry day. The price rises, the averages follow, and later the 10-day EMA crosses back below the 20-day EMA, where the trade ends.10-day EMA20-day EMA200-day SMACross up: buyCross down: sellStop
Schematic, not real prices. The 10-day EMA crosses above the 20-day EMA while the close is above the 200-day SMA: the entry. The stop stays fixed; the trade ends when the 10-day EMA crosses back below the 20-day EMA.

The exact rules

These are the rules the 10/20 EMA Cross preset runs in Clear Tape, checked on daily bars after each close. This page and the software read the same rulebook, so they always agree.

Entry

  • The 10-day EMA crosses above the 20-day EMA: above it at today's close, at or below it the session before.
  • The close is above the 200-day SMA. Buy at that close.

Stop

  • The higher of the entry day's low and entry − 2 × ATR(14), but never more than 10% below the entry. Set on the entry day.

Exit

  • The 10-day EMA crosses back below the 20-day EMA; sell at that close.

Target

  • None of its own. The target shown is 2R (twice the entry-to-stop distance above the entry), for reference only; the trade is not closed there.

Parameters

ParameterValue
Fast averageEMA 10
Slow averageEMA 20
Trend filterclose > SMA 200
Stophigher of the day low and entry − 2 × ATR(14); at most 10%
Minimum history220 sessions

Data it needs

  • Daily bars (open, high, low, close), split-adjusted: at least 220 sessions, about 10 months.

Terms used

  • EMA (exponential moving average): An average of closing prices that gives recent days more weight (each new close counts 2/(n+1)), so it turns sooner than an SMA of the same length.
  • SMA (simple moving average): The plain average of the last n closing prices, today included. "The 50-day SMA" averages the last 50 closes.
  • Crosses above / below: A crosses above B when A is above B today and was at or below B the session before. Crosses below is the mirror image.
  • ATR (average true range): A stock's typical daily move. Each day's true range is the largest of high − low and the distances from the previous close to the high and to the low (so gaps count); ATR(n) averages it Wilder's way (each new day counts 1/n). A stop set in ATRs sits farther away on a jumpy stock.
  • R (risk per share): Entry minus stop. A 2R target sits twice that distance above the entry.

Who it suits

Traders who cannot watch the session but can run a short routine each evening, and who prefer shorter, more frequent trades. Gap risk must be accepted.

This strategy suits traders who want the plainest possible rules and a signal they can check in seconds after the close: is the 10 EMA above the 20 EMA today, and was it at or below it yesterday? There is no pattern to judge and no target to manage, so it is a common first system for traders moving from discretionary decisions to written rules.

The price of that simplicity is lag and whipsaw. Both averages follow the price, so the entry comes after the turn and the exit after the top; in a sideways market the two lines tangle and produce a run of small losses. Traders who run it accept those costs in exchange for staying with the trends that do develop, and they size every trade from the stop so that a string of whipsaws stays affordable.

Strengths

  • Pullbacks give a lower entry price and an obvious place for the stop.
  • Decided once a day after the close; no need to watch the session.
  • Two families cover trending markets and choppy markets in a long uptrend.
  • Mean-reversion trades exit on strength, typically within two to six sessions.

Weaknesses

  • Overnight and earnings gaps can turn a planned 1R loss into 2R or 3R.
  • Mean reversion: small gains, with occasional losses several times larger.
  • Thin average gains make results sensitive to trading costs.
  • Depends on the market: trend entries lose in ranges, dip buys in declines.

Where it struggles: Sideways markets, where many small losses pile up; signals lag sharp V-shaped turns.

Common mistakes

  • Taking crosses below the 200-day average. The filter is part of the rule; an upward cross in a stock below its 200-day SMA is usually a rebound inside a downtrend.
  • Acting on a cross during the session. The averages are calculated from closing prices, and an intraday cross can disappear by the close. The signal counts only at the close.
  • Changing the averages after every losing streak. Swapping 10/20 for 8/21 or 12/26 because recent trades failed is curve fitting; choose the pair once, backtest it and judge it over dozens of trades.
  • Expecting trends in a flat market. When the averages run close together, crosses come every few days and most of them lose a little. Check whether the stock is trending before reading much into a cross.
  • Ignoring position size because the stop is close. The stop can be as near as the entry day's low, which makes the share count large. Size from the stop with the position size calculator and cap each position as a share of the account.

Worked example

Illustrative numbers only. A stock closes at $50.00, its 200-day SMA is $44 and, at this close, the 10-day EMA moves above the 20-day EMA after being below it the session before. The strategy buys at $50.00. The day's low was $47.80 and ATR(14) is $1.40, so entry − 2 × ATR is $47.20. The stop is the higher of the two, $47.80, well within 10% of the entry. Risk per share is $2.20.

With a $25,000 account and 1% risk ($250), the position is $250 ÷ $2.20 ≈ 113 shares, about $5,650. If the stop is hit, the loss is about $249, or 1R. If the stock trends higher instead and, weeks later, the 10 EMA crosses back below the 20 EMA on a close of $56.50, the position is sold at that close for $6.50 a share, about $735 or 3R before costs. A whipsaw looks different: a cross back two weeks later at $49.40 costs $0.60 a share, about $68. The 2R level of $54.40 is shown for reference only; this strategy has no target.

Learn and practice

Academy lessons

Calculators and guides

Glossary terms

Using it in Clear Tape

  • Free Turn on the 10/20 EMA Cross preset in Trading systems. The rules are written out in full, and you can build your own systems from them (Free: up to 5 systems and a 50-stock watchlist).
  • Tools After every close, 10/20 EMA Cross screens your watchlist and lists its signals, with the entry, the stop and the target drawn on the chart.
  • Free Check against my system: every rule of 10/20 EMA Cross on any stock's daily bars, the levels it sets and the caveats (earnings close by, thin trading, gaps wider than the stop), with a short AI-written explanation of those facts. One check a day on Free as a trial, 10 on Tools, 30 on Pro.
  • Tools Backtest 10/20 EMA Cross with the two-period test: judged on 2000–2014, then run unchanged from 2015 to now against holding the same stocks, with your own costs and risk per trade (Tools 20 backtests a day, Pro 50). Results are hypothetical: each report discloses costs and survivorship bias, and past results do not predict future ones.
  • Free Log the trades in the free trade journal, tagged with the system: R multiples, expectancy and an AI score of how closely each trade followed the plan.
  • Pro The AI coach proposes rules from the way you actually trade (Pro, 5 conversations a month).

For educational purposes only. Not investment advice. Backtest results are hypothetical and do not predict future results.

Questions

What is the 10/20 EMA crossover strategy?

It buys a stock when its 10-day exponential moving average crosses above its 20-day exponential moving average, as long as the close is above the 200-day simple moving average, and sells when the 10-day crosses back below the 20-day. The stop is set on the entry day at the higher of that day's low and the entry minus two ATRs, at most 10% below the entry.

Is the 9/21 EMA crossover better than 10/20?

The two pairs behave almost identically: in each, the fast average is about half the length of the slow one, so they cross on nearly the same days. Neither is better in principle. What matters is choosing one pair, testing it on the stocks you trade with your own costs and keeping it unchanged long enough to judge it.

Why use EMAs instead of simple moving averages?

An exponential moving average gives more weight to recent closes, so it turns sooner than a simple average of the same length. For a short-term crossover that means slightly earlier signals in both directions. The long-term filter here is a 200-day SMA, where reacting quickly matters less.

Why does an EMA crossover strategy lose in sideways markets?

When a stock moves sideways, its short averages flatten and run close together, so small swings push the 10-day back and forth across the 20-day. Each cross becomes an entry or an exit, and most of those trades end with small losses or near break-even. The 200-day filter removes downtrends but not ranges, which is why each trade is sized so that a string of whipsaws stays affordable.

How is this different from a golden cross?

A golden cross is the 50-day average crossing above the 200-day, a slow signal that occurs only a few times a decade in many stocks and is mostly read as a gauge of the long-term trend. The 10/20 cross is a swing-trading signal that can fire several times a year in one stock. Here the 200-day average acts only as a filter, not as part of the cross.

Other strategies

Run the rules on your own watchlist

Turn on a preset in Trading systems and Clear Tape applies its rules exactly as this page writes them. The rules, the stock check and the trade journal are free; daily screening and backtests come with Tools.