$BTC

What is the Golden Cross?

The Golden Cross is a technical analysis pattern that literally consists of the "crossing" of two moving averages (Moving Average, MA): one short-term and one long-term. As you might guess, short-term moving averages are more dynamic; they move more quickly. Meanwhile, a long-term moving average remains more stable. It usually has a certain upward or downward inclination, but reflects market movements in a smoother way. Thus, the short-term MA has the ability to cross above or below the long-term MA, offering signals for entering or exiting the market and laying the groundwork for designing trading strategies. Specifically, the Golden Cross is a bullish crossover and is useful as an indicator of trend initiation.

How does the Golden Cross trading strategy work?

The functioning of the Golden Cross is quite simple: when the short-term MA crosses the long-term MA and is situated above it, it is understood that the market has changed its directionality and a bullish trend is forming. In this way, a buy signal is generated. The most commonly used moving averages are the MA 50 for short-term and the MA 200 for long-term. Regarding the timeframe, it works especially well with daily charts. Furthermore, this indicator is based on technical analysis and can be used in most financial markets (including cryptocurrencies), although there is a certain preference for applying it to stock indices.

Tips for trading with the pattern

Be patient

Although the Golden Cross is quite simple to identify and interpret, it is necessary to wait for the candle to close. Additionally, it is recommended that the candle closes above the crossover itself. Of course, you should not trade before the crossover of the two moving averages occurs (simply by seeing that it is very close to happening and the MA 50 has a clear upward inclination).