Golden Cross vs. Death Cross
What is the Golden Cross?
The Golden Cross is a Bullish Momentum signal. It consists of two EMA lines (Exponential Moving Averages) crossing each other. Ideally, a smaller EMA such as the 50 EMA crosses over the 100 EMA to the upside, signaling Bullish Momentum. For this article, I will be using the 20 EMA and the 50 EMA.
Chart Source provided by Thinkorswim
What is a Death Cross?
A Death Cross is a Bearish Momentum signal. It consists of a smaller EMA crossing below a larger EMA signaling a bearish momentum.
Chart Source provided by Thinkorswim
How Can I use the Golden and Death cross to my advantage?
The Golden Cross is a Bullish Momentum signal. It allows traders and investors to initiate a long position (buy stock) in any particular stock. On the other hand, the Death Cross is a Bearish Momentum signal. It is a possible indication that the price in a stock will drop. It signals traders and investors to sell their stock or initiate a short position.
What is the best time frame to use these signals?
Since professional investors tend to buy and hold stock for longer periods of time, they often use the 1 year 1 day time frame. Shorter term traders will sometimes use smaller time frames such as the 20 day 1 hr or the 9 months 4 hour. Time frames are used in relation to the amount of time that the trade will be held.
What confirms the Bullish or Bearish Momentum?
When either the Golden or Death cross occurs and is accompanied by high volume, the confirmation is more decisive. When all these technical indicators work in tandem, the signals are considered valid.
**This is a condensed explanation of the Golden Cross and Death Cross indicators used for educational and entertainment purposes only. Pennystocksclub13 intends to educate beginner traders with easily accessible and simplified information to shorten the learning curb. Traders should always do their due diligence and continue educating themselves about the risks involved with trading.
Disclaimer: Results may not be typical and may vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk!