Golden cross meaning is a chart pattern where a shorter-term moving average (MA) crosses above a longer-term moving average. A golden cross is typically considered to be a bullish signal. Below is an example of a golden cross.
A golden cross typically occurs in three phases:
• There’s a downtrend where the shorter-term MA is below the longer-term MA.
• The market reverses and the shorter-term MA crosses over the longer-term MA.
• A continued uptrend starts and the shorter-term MA stays above the longer-term MA.
A golden cross can be valid using both simple moving average (SMA) pairs and exponential moving average (EMA) pairs. Some traders may look for high trading volume to accompany the golden cross for additional confirmation of the pattern.
Once the crossover happens, the longer-term moving average is typically considered to be a strong area of support. Some traders may wait for a retest of this moving average for an entry point into the market.
It is also important to note that higher-timeframe signals are usually more reliable than lower-timeframe signals. For example, a golden cross on the daily chart will probably have a greater impact on the market than a golden cross on the hourly chart.
The opposite of the golden cross is the death cross, which is a chart pattern where a shorter-term moving average crosses below a longer-term moving average. As such, the death cross is typically considered to be a bearish signal.
What is the death cross?
Now that we know golden cross meaning, let us look at the death cross. A death cross is a chart pattern where a short-term MA crosses below a long-term MA. For example, the 50-day MA crosses below the 200-day MA, as shown in the graph below. As such, a death cross is typically considered to be a bearish signal.
Typically, a death cross happens in three phases:
• The short-term MA is above the long-term MA during an uptrend.
• The trend reverses, and the short-term MA crosses below the long-term MA.
• A downtrend starts when the short-term MA stays below the long-term MA.
The short-term average is crossing below the long-term average, which indicates a bearish outlook on the market.
In Conclusion
Golden cross meaning is a chart pattern where the short-term MA crosses above the longer-term MA. It usually signifies the start of a bullish trend in the market.
