Post by Victor VVV on Jul 30, 2019 12:24:59 GMT -5
The “cross” refers to two simple moving averages “crossing” over each other.
A golden cross is considered a bullish sign; it occurs when the 50-day moving average rises
above 200-day moving average.
A death cross is considered a bearish sign; it occurs when the
50-day moving average drops below 200-day moving average.
Example of Golden Crossover
Example of Death Crossover
How reliable is a death cross?
- The death cross is a signal that short-term momentum in a stock or stock index is slowing, but the
death cross is not always a reliable indicator that a bull market is about to end. There have been
many times when a death cross appeared, such as in the summer of 2016, when it proved to be a
false indicator.
Apr 20, 2019
How reliable is golden cross?
-A golden cross is a positive momentum indicator, occurring when a security's short-term price
moving average moves above its long-term moving average. ... Each cross signals a price trend. For
example, a golden cross is seen as a strong indication that a security will continue to go up in price.
Jun 26, 2018
Google
Profit Potential of the Golden Cross Pattern
The profit potential will depend on the stock and the setup going into the trade.
The profit potential will depend on the stock and the setup going into the trade.
I hate to be so vague, but that's the reality of trading.
Prior Support
What you can do is look for areas of resistance overhead which will act as selling
What you can do is look for areas of resistance overhead which will act as selling
opportunities for longs that have been holding the stock for a long period of time.
Death Cross
Another option is to wait for a cross of the 50 back below the 200 as another selling
Another option is to wait for a cross of the 50 back below the 200 as another selling
opportunity. The only issue with this approach is you are likely to give back a sizeable
portion of your profits since moving averages are a lagging indicator,
Trendline Break
If the golden cross is real, the signal will generate a strong buying opportunity. You can
If the golden cross is real, the signal will generate a strong buying opportunity. You can
then use the first couple of reactionary lows to create an uptrend line.
You then hold the stock until this trendline is broken.
Bullish Golden Cross Pattern Example
Again, we have a bullish golden cross stock pattern when the faster SMA on the chart
breaks the slower SMA in a bullish direction.
This is the same golden cross trading signal from the previous chart. However, this time we
demonstrate the strength of the signal and the potential run a stock can make after a golden
cross materializes.
In this particular example for First Energy Corporation, the stock went on a 9.2% run
In this particular example for First Energy Corporation, the stock went on a 9.2% run
in 6 trading days.
Not a bad one-week return for all my swing traders out there.
Not a bad one-week return for all my swing traders out there.
3 Ways You Can Trade the Golden Cross with Edge
Strategy #1 - Look for Setups After a Long Down Trend
All golden cross setups are not equal. One method you can use is to wait for a stock that has
had a long sustainable downtrend and then look for a stock that is ready to make a move higher.
Reason being there is so much bearishness in the stock, that the signal has tremendous significance.
Reason being there is so much bearishness in the stock, that the signal has tremendous significance.
The power of this signal is that the cross happens after a multi-year downtrend. By having such a
long bearish trend, in order to get a bullish cross, there has to be a basing period. This basing period
is the battle between the bulls and the bears.
Therefore, once the stock breaks to the upside, you know there is juice behind the move.
You can buy that initial breakout after the base, but realize you could still be in the thick of a bear,
Therefore, once the stock breaks to the upside, you know there is juice behind the move.
You can buy that initial breakout after the base, but realize you could still be in the thick of a bear,
so don't get married to the stock. Look for opportunities as the stock rises to secure your gains.
Strategy #2 - Avoid Wide Spreads Between Moving Averages
At times the averages will have a widespread. This will present a cup and handle like formation of
At times the averages will have a widespread. This will present a cup and handle like formation of
the averages. On the surface, it's going to look really bullish.
However, if you look at the price action, you will notice the pattern is unhealthy. First, the price is
shooting straight up. What happens when a stock goes parabolic into a strong primary trend
- it reverses.
What does this chart example teach us?
You cannot ignore price action, especially when you have a large overhead gap acting as resistance.
For these types of golden crosses, you will want to avoid these setups. While these types of charts are still
You cannot ignore price action, especially when you have a large overhead gap acting as resistance.
For these types of golden crosses, you will want to avoid these setups. While these types of charts are still
considered valid golden crosses, there are better opportunities in the market.
So, what's the trade here? Well, there isn't one.
As traders, we have to remember that sometimes the best action is no action at all.
So, what's the trade here? Well, there isn't one.
As traders, we have to remember that sometimes the best action is no action at all.
Strategy #3 - Combine Double Bottom Pattern with Golden Cross
The last strategy we will cover combines the double bottom chart formation with the golden cross.
Here is the setup.
Look for a double bottom on the chart. The second low should be lower than the first.
Next wait for the golden cross formation. Lastly, wait for the price to retest the 200 simple moving average.
You want to buy the test of the 200 moving average with a stop below the low of the double bottom.
The below chart illustrates this formation.
The last strategy we will cover combines the double bottom chart formation with the golden cross.
Here is the setup.
Look for a double bottom on the chart. The second low should be lower than the first.
Next wait for the golden cross formation. Lastly, wait for the price to retest the 200 simple moving average.
You want to buy the test of the 200 moving average with a stop below the low of the double bottom.
The below chart illustrates this formation.
Conclusion
The golden cross is a powerful trade signal, but this does not mean you should go out here
The golden cross is a powerful trade signal, but this does not mean you should go out here
buying every cross of the 50-period moving average and the 200.
You will need to bring a higher level of sophistication to the setup, to ensure you are buying
You will need to bring a higher level of sophistication to the setup, to ensure you are buying
into a trade with real opportunity.
Best Moving Average Crossover Trading Strategy? (for swing trading mostly)
Are There Better Numbers?
The 50-day and 200-day SMAs are conventionally used in determining crossovers, but are they
The 50-day and 200-day SMAs are conventionally used in determining crossovers, but are they
the best averages to trade? ETF HQ tested a massive number of combinations of moving averages
to determine which two averages generated the highest crossover trading returns.
They used a total of 300 years worth of daily and weekly data from 16 different global indices to
They used a total of 300 years worth of daily and weekly data from 16 different global indices to
determine which two moving averages would have produced the largest gains for crossover traders.
The Results
First, ETF HQ found that exponential moving averages (EMAs), which weight most recent prices
First, ETF HQ found that exponential moving averages (EMAs), which weight most recent prices
heavier than earlier prices, perform better overall than SMAs, which weight all prices in the
timeframe equally.
Among short- and long-term EMAs, they discovered that trading the crossovers of the 13-day
Among short- and long-term EMAs, they discovered that trading the crossovers of the 13-day
and 48.5-day averages produced the largest returns.