What is the Golden Cross?
The Golden Cross is a bullish signal formed when the short-term moving average (for example, the MA 50) crosses above a long-term moving average (for example, the MA 200) or intersects a resistance area. Because long-term indicators are generally more reliable (MA200), Golden Cross shows that the uptrend may have started and this signal will be better when there is an increase by trading volume (investors are in the mood of excitement).
Main factors:
- Golden Cross is an indicator that shows the potential for upcoming long-term growth.
- Golden Cross appears on the chart when the short-term MA line crosses the long-term MA line of the asset.
- The golden cross can be contrasted with a death cross indicating a bearish price movement (the shorter moving average MA cuts down the longer moving average).
What do you know from Golden Cross?
- There are three stages to creating a Golden Cross signal.
- The first state demands a final downtrend that will cause prices to bottom out as selling is exhausted.
- In the second state, the shorter MA line crossed above the larger MA line to trigger a breakout and confirm a trend reversal.
- The final state is an uptrend that continues and drives prices higher. The moving averages act as support levels on the pullback, until they cross again at the point where a Death Cross can form.
How to use Golden Cross in Trading
The most frequently used moving averages are the 50 and 200-period moving averages. To determine this indicator, you can choose any time frame. The bigger the time frame is, the stronger the upward trend is and sustain for a longer time. The most common Golden Cross is the 50-day SMA cross over the 200-day SMA.
Day traders often use smaller time periods such as 5-period and 15-period moving averages to identify “Golden Cross” during the day. The time interval of the chart can also be adjusted from 1 minute to several weeks or months. Just as larger intervals produce stronger signals, the same applies to chart intervals. The bigger the chart time frame, the stronger and longer the Golden Cross.
You should use support tools such as RSI indicator, MACD, GMMA, Fibonacci … to increase reliability when entering more orders.
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