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Golden Cross

Golden Cross

To understand the golden cross, we need to first get a sense of moving averages and, particularly, the short-term, and the longer-term moving averages. Moving averages are created to filter out the “noise” by eliminating day-to-day fluctuations and creating trends, which also indicate the state of the financial activity. The short-moving average is designed to analyze the present market trends, whereas the longer-term moving average, allows the analyst to observe market activity over a long period of time. Depending on the market activity, both moving averages create widely different trends when represented on a chart.

When graphed together, these averages can result in crossovers such as the golden cross, and the death cross. The golden cross is the meeting point between the two moving averages where the short-term moving average breaks above the long-term moving average. This indicates a change in market activity which brings good news for the businesses, since the current market activity is greater than the previous activity. The market momentum, as indicated by the golden cross, has shifted up. In most – but not all – circumstances, the short-term moving average is of 50 days, while the longer-term moving average is of 200 days.

The implications of a golden cross

Many analysts rejoice when they observe the golden cross, since it is an indicator of a bullish market. This means that the current market conditions are defined by high trading volumes. Based on this indication, and with the help of other statistics, analysts can then predict an upsurge in the market activity. In stock market, while observing the short and long-term moving averages of the stock, analysts can determine that the market activity is now in favor of the stock.

However, it is imperative to note that the golden cross should never be seen as the sole indicator of market condition. In fact, it must always be used in addition with other, similar, indicators for best results. The key to the success of the golden cross is its simplicity. But the very same simplicity can spell doom for your investments if relied upon too heavily.

Difference between golden cross and death cross

Although seemingly similar-sounding indicators, the golden cross, and the death cross vary widely in their implications. In fact, they are exact opposites. While, on one hand, the golden cross is an indicator of a healthy market activity, the death cross indicates downturn. However, they are also similar in that both of these indicators occur at the intersection of short and long-term moving averages, and can be used to predict the market situation in the future.


Further Reading

Golden cross as Buying Indicator for Stock Investment in Bursa MalaysiaGolden cross as Buying Indicator for Stock Investment in Bursa Malaysia
myjms.moe.gov.my [PDF]
There are many factors affecting the performance in stock markets, causing difficulties for traders in ascertaining the right time for them to purchase shares. This paper analyzes the use of the Golden Cross as an indicator for buying stock, based on the stock market of Bursa …

Golden parachutes, executive decision-making, and shareholder wealthGolden parachutes, executive decision-making, and shareholder wealth
www.sciencedirect.com [PDF]
There are many factors affecting the performance in stock markets, causing difficulties for traders in ascertaining the right time for them to purchase shares. This paper analyzes the use of the Golden Cross as an indicator for buying stock, based on the stock market of Bursa …

Dismantling the cross of gold: economic crises and US monetary policyDismantling the cross of gold: economic crises and US monetary policy
www.sciencedirect.com [PDF]
There are many factors affecting the performance in stock markets, causing difficulties for traders in ascertaining the right time for them to purchase shares. This paper analyzes the use of the Golden Cross as an indicator for buying stock, based on the stock market of Bursa …

Is Bitcoin a better safe-haven investment than gold and commodities?Is Bitcoin a better safe-haven investment than gold and commodities?
www.sciencedirect.com [PDF]
There are many factors affecting the performance in stock markets, causing difficulties for traders in ascertaining the right time for them to purchase shares. This paper analyzes the use of the Golden Cross as an indicator for buying stock, based on the stock market of Bursa …

Multifractal detrended cross-correlation analysis of gold price and SENSEXMultifractal detrended cross-correlation analysis of gold price and SENSEX
www.sciencedirect.com [PDF]
There are many factors affecting the performance in stock markets, causing difficulties for traders in ascertaining the right time for them to purchase shares. This paper analyzes the use of the Golden Cross as an indicator for buying stock, based on the stock market of Bursa …

Financial derivatives: The new gold?Financial derivatives: The new gold?
journals.sagepub.com [PDF]
There are many factors affecting the performance in stock markets, causing difficulties for traders in ascertaining the right time for them to purchase shares. This paper analyzes the use of the Golden Cross as an indicator for buying stock, based on the stock market of Bursa …

Discovering golden nuggets: data mining in financial applicationDiscovering golden nuggets: data mining in financial application
ieeexplore.ieee.org [PDF]
There are many factors affecting the performance in stock markets, causing difficulties for traders in ascertaining the right time for them to purchase shares. This paper analyzes the use of the Golden Cross as an indicator for buying stock, based on the stock market of Bursa …


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