What is a Crossover Rule?
In terms of financial matters, a crossover rule is a regulation or rule that helps an investor to determine what sort of action to take, based on the movement of a given financial instrument. Crossover rules rely on the use of technical analysis to determine both the current movement and the options that are available to the investor when it comes to determining whether to go with a long position or a short position in regard to the investment opportunity. The crossover rule is not an arbitrary recommendation that is based on tradition, but on solid economic principles that can be applied to the current market conditions. To a great extent, the crossover rule is based on simple common sense. The rule dictates that the investor take a long look at the current status of the financial instrument in question. Assuming that the Directional Movement Index, or DMI, indicates positive movement in the future, the response of the investor is likely to be establishing a long position in order to
