Classic 50/200 SMA Crossover with Visual Signals

Classic 50/200 SMA Crossover with Visual Signals

This indicator implements the traditional 50/200 Simple Moving Average (SMA) crossover strategy, known as the “Golden Cross” (bullish) and “Death Cross” (bearish), a cornerstone of technical analysis for identifying long-term trend reversals. Unlike EMA-based indicators, it uses SMAs for a smoother, more stable signal, aligning with the classic textbook definition favored by traditional traders. Enhanced with clear visual markers, it helps traders spot these significant crossover events with ease.

Key Features

SMA Calculation: Computes the 50-period and 200-period SMAs on the closing price, plotted with distinct colors (cyan for 50 SMA, purple for 200 SMA) and 75% opacity for chart clarity.

Crossover Detection: Identifies when the 50 SMA crosses above (bullish Golden Cross) or below (bearish Death Cross) the 200 SMA, signaling potential major trend changes.

Visual Cues: Displays a yellow circle above the candle at the crossover point and uses stacked labels to create a styled marker (orange outline with a semi-transparent yellow fill) at the average price of the two SMAs, ensuring signals are easy to spot.

How It Works

The indicator calculates the 50 and 200 SMAs using the ta.sma() function in Pine Script v5. Crossovers are detected with ta.crossover() (bullish) and ta.crossunder() (bearish). To enhance visibility:
A small yellow circle is plotted above the candle where the crossover occurs.

Two labels mark the crossover price (average of the two SMAs): an outer orange label for the border and an inner yellow label for the fill, both with controlled opacity to reduce chart noise.

Usage

This indicator is ideal for traders focusing on long-term trend reversals, particularly swing or position traders using traditional technical analysis. It performs best on higher timeframes, such as:
Daily or 4-hour charts for stocks, forex, or cryptocurrencies to identify major trends.

Weekly charts for long-term investment strategies.
To use it effectively:

Apply the indicator to a chart and ensure the 50 and 200 SMAs are visible.

Look for yellow circles and styled markers to identify Golden Cross (50 SMA above 200 SMA) or Death Cross (50 SMA below 200 SMA) events.

Validate signals with other tools (e.g., volume, support/resistance, or macroeconomic factors), as SMA crossovers can produce false signals in choppy markets.

Consider entering long positions after a Golden Cross or exiting/shorting after a Death Cross, depending on your strategy.

Limitations

SMAs are lagging indicators, often reacting slower than EMAs, which may delay signals in volatile markets.

False signals are common in range-bound or low-volatility conditions, requiring additional confirmation.

The visual markers rely on historical data and do not predict future price movements.

This indicator is less effective for short-term trading due to the long SMA periods.

Why This Indicator?

The 50/200 SMA crossover is the definitive “textbook” version of the Golden/Death Cross, distinct from EMA-based variants due to its smoother, less reactive signals, appealing to traditional technical analysts. This script enhances the classic strategy with unique visual signals—yellow circles and styled labels—not typically found in standard SMA indicators, offering a clear, professional tool for long-term trend analysis. It adds value to the TradingView community by providing a reliable, visually intuitive implementation of a time-tested strategy.