Golden Cross and Death Cross: A Trend Trading Guide
Moving Averages is a popular and reliable technical indicator used to study price movement and identify the opportunities. The Moving Averages refers to the average of closing prices over a particular period.
When a stock’s short-term Moving Average climbs above its long-term Moving Average, it shows up on the technical charts as the Golden Cross and signals a bullish turn in sentiments. On the other, the death cross signals a bearish turn and occurs when a short-term moving average goes under a long-term moving average. The golden cross and the death cross together work as a robust trading strategy as it signals traders to follow the trends indicated by these patterns.
Decoding Golden Cross
When a stock enters a golden cross after having seen multiple death crosses, it can be a strong sign of trend reversal in favour of bulls. When markets are in favour of bulls, as indicated by a golden cross, you can buy with slightest dips in prices.
Decoding Death Cross
The name for this pattern is derived from the X shape created when the short term moving average goes under the long term moving average. A death cross is a technical chart pattern used to predict market movements and is an indicator of a potentially major sell-off. When the markets are bearish, as the death cross indicates, buyers sell when prices spike even a little bit.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.