What is a golden cross in trading
Its a popular signal that is seen by a wide public as a bullish signal and therefore supported by high trading volumes and therefore supported by a strong buy momentum
How does a golden cross pattern look:
The 50 day moving average crosses the 200 day Moving average
The Three Stages of a Golden Cross
The golden cross is characterized by three stages. They include:
- A downtrend in the stock market that eventually ends when selling is depleted.
This stage happens prior to the crossing of the moving averages. It corresponds to the phenomenon whereby a long-term trend has a short-term trend traversing below it.
- The crossover where the market recovers.
Here, the short-term moving average crosses over the long-term moving average. It is at this stage, the term golden cross is derived, from the crossing of the two moving averages on the chart.
- The continuation of upward movement by the short-term moving average
This is what most of the market watchers and investors capitalize on. Generally, they hope that the continuation of the upward trend proves to be the bullish trend sign for the stock market, leading to higher prices.
Final Thought on the golden Cross
The golden cross in trading therefore proves to be an important tool for market watchers and investors. However, there is a need to know that you won’t bank on this indicator alone, buying at every sight of the indicator. Adoption of the above-given strategies and combining this indicator with complementary indicators will help you make an informed decision about the stocks.
The opposite of the Golden Cross
Is the Death cross here you can find out what it lookslike Charts.