What is the Golden Cross?
The "Golden Cross" is one of the most famous bullish signals in trading. It occurs when a faster moving average (like the 50-day SMA) crosses ABOVE a slower moving average (like the 200-day SMA). This indicates that short-term momentum is outpacing the long-term trend, signaling a potential bull market.
The "Death Cross" is the opposite: the 50-day crosses BELOW the 200-day, signaling a potential bear market.
Trading Strategy
Golden Cross (Buy)
- Signal: 50 MA crosses ABOVE 200 MA.
- Confirmation: High volume on the day of the cross.
- Entry: Market buy at broad market open.
- Stop Loss: Below the 200 MA.
Death Cross (Sell)
- Signal: 50 MA crosses BELOW 200 MA.
- Confirmation: High volume on the drop.
- Entry: Sell all long positions or short.
- Stop Loss: Above the 200 MA.
Lag Warning
Moving averages are lagging. By the time a Golden Cross happens, the price has usually already risen significantly. This strategy is for capturing LONG trends, not for catching bottoms.