Golden Cross: Facts You Need to Know

Golden Cross

What is a Golden Cross?

The golden cross is a chart pattern in which the relatively short-term moving average exceeds the long-term moving average. The golden cross is a bullish breakout pattern formed by a crossover in which the short-term moving average of a security (such as a 15-day moving average) exceeds the long-term moving average (such as a 50-day moving average). .. Day) or resistance level. The golden cross shows a bull market on the horizon and is strengthened by a large number of transactions, as long-term indicators are more important.

What does the golden cross tell you?

The golden cross has three stages. The first stage requires a downtrend to eventually bottom out when sales are exhausted. In the second stage, the short moving average intersects the large moving average, causing a breakout and trend reversal confirmation. The final stage is a continuous upward trend towards higher prices. The moving average acts as a pullback support level until crossback, which can create desk loss. Desk loss is the opposite of the golden cross, as the short moving average crosses the long moving average.

The most commonly used moving averages are 50 and 200 period moving averages. The period represents a specific time interval. In general, it tends to form stronger permanent acne over the long term. For example, a daily crossover from a 50-day moving average to a 200-day moving average on an index like the S & P 500 is one of the most popular signals in the bull market. In the watch index, the motto “rising tide lifts all boats” is applied as a golden cross that resonates with purchases through the components and sectors of the index.

Day traders typically trade daytime golden cross breakouts using shorter periods, such as moving averages of 5 and 15 periods. You can also adjust the chart time interval from 1 minute to weeks or months. Just as the longer the period, the stronger the signal, so does the chart period. The larger the chart time frame, the stronger and longer the gold cross breakout tends to last.

Example of a golden cross

As a fictitious example, a gold cloth with 50 and 200 cycle moving averages is significantly stronger and more durable than the same crossover with 50 and 200 cycle moving averages on a 15 minute chart. The Golden Cross Breakout Signal can be used in various momentum oscillators such as Stochastic Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) to track uptrends overbought or oversold. This will help you identify the ideal entrance and exit.

The difference between Golden Cross and Desk Loss

The golden cross and the death cross are the opposite. The gold cross shows the long-term bull market in the future, and the death cross shows the long-term bear market. Both refer to a solid confirmation of long-term trends by the occurrence of short-term moving averages that intersect the major long-term moving averages.

The golden cross occurs when the short-term moving average crosses the major long-term moving average upwards, which analysts and traders interpret as a clear upward turnaround signal for the market. Conversely, a similar downward moving average crossover forms a desk loss and is considered a decisive downtrend signal for the market. If the trading volume is high, both crossovers are considered more important.

When a crossover occurs, the long-term moving average is considered to be a significant support level (for golden cross) or resistance level (for desk loss) in the subsequent market. Both intersections can act as a signal of a trend change, but are more common as a powerful confirmation of a trend change that has already occurred.

Restrictions on the use of Golden Cross

All indicators are lagging behind and no indicator can actually predict the future. In many cases, the perceived golden cross produces a false signal. Gold crosses also occur on a regular basis, despite the clear predictive power in forecasting the major bull markets of the past. Therefore, gold crosses should always be checked with other signals and indicators before opening a trade.

The key to proper use of Golden Cross (using additional filters and indicators) is to always use the correct risk parameters and ratios. Keep in mind that you should always maintain a favorable risk-to-reward ratio and adjust the timing of your transactions. This may give better results than blindly tracking the cloth.

How do you recognize the golden cross on the map?

The golden cross occurs when the short-term moving average crosses the major long-term moving average upwards, which analysts and traders interpret as a clear upward turnaround signal for the market. Some analysts define this as a crossover between the 100-day and 50-day moving averages. Others define it as the intersection of the 200-day average and the 50-day average. In other words, the trend of the short-term average rises faster than the long-term average until it crosses.

What does the golden cross show?

The golden cross suggests a long-term future bull market. This is the opposite of desk loss, which is a polling indicator when the long-term moving average is below the short-term MA.

Is Golden Cross a reliable indicator?

As an indicator of lag, gold crosses are identified and appear reliable only after the market has risen. However, due to the delay, it is also difficult to know later if the signal is false. Traders often use gold crosses to see trends and signals in combination with other indicators.

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