Crossfade isn't an effect, it is a transition.
Select the clips. Click the transition button on the toolbar. Choose CROSSFADE. Click the box at the bottom of the window and choose APPLY TO SELECTED CLIPS.

If there is no transition button on the toolbar, go to OPTIONS|DISPLAY and check the SHOW CUSTOM tab.
Then, click on the CUSTOM menu tab followed by the CUSTOMIZE button on the toolbar. Check the TRANSITION box.