This article is aimed at discussing DEATH CROSS AND GOLDEN CROSS – TWO KEY INDICATORS IN FINANCIAL MARKETS, MEANING OF A GOLDEN CROSS, MEANING OF A DEATH CROSS, RELATIONSHIP OF DEATH CROSS WITH STOCKS AND CRYPTO, RELATIONSHIP OF GOLDEN CROSS WITH STOCKS AND CRYPTO, Examples of Bitcoins, Death Cross.
Although there are so many kinds of technical analysis existing, sometimes it is best to go back to the basics. In today’s article, we discuss the death cross and golden cross, two of the most popular technical indicators that are easily identified in a chart. A cross is a simple event anyone can learn to identify and use.
The golden and death cross simply defined occurs when a long-term and short-term moving average cross one another respectively. Before we dive into that further, let’s quickly check the meaning of a moving average:
Death Cross And Golden Cross – Two Key Indicators In Financial Markets.
A moving average is an indicator used to simplify the trending direction of an asset. It represents the average price of an asset for a given time frame. For example, the 50-day moving average plots the average price of the last 50 days. Each day, it refreshes by removing the oldest data point and adding a new one. The most commonly used moving averages are the 50-day and the 200-day moving averages.
Meaning of a Death Cross
Meaning of a death cross is not far fetched. A death cross happens when a shorter moving average crosses below a longer moving average. For example, when the 50-day moving average drops below the 200-day moving average. This simply means that the long-term trend is dominating the short-term trend, and therefore the market can be considered bearish.
However, before the death cross happens, the price must have pulled back quite far from the bullish wave. Generally, the market is trending upwards, and the shorter-term moving averages are above the longer-term ones.
It can take quite a heavy drop for the price to be able to pull down the short-term average enough for it to cross below the long-term moving average.
This means that sometimes, the death cross presents a fake signal, where the price actually moves upwards shortly after the signal presents itself.
Relationship Of Death Cross With Stocks and Crypto
Relationship of death cross with stocks and crypto simply helps us understand how the affect themselves. Let’s look at a few examples of the death cross. The chart below shows the recent death cross on the Nasdaq 100, one of the major stock indices in the United States. As you can see, the death cross only occured three months after the Nasdaq topped the charts.
Nevertheless, it went on to drop another 10%. Because it has a falling nature, it can also present fake signals. As you can tell in the chart below, the Nasdaq 100 also printed a death cross after the March crash of 2020. However, it quickly reversed the signal and went on a bullish trend for more than a year.
The death cross doesn’t apply atimes to stocks or indices. We can also check out crypto for other examples of the death cross.
Examples of Bitcoin Death Cross
There are examples of Bitcoin death cross. Recently the death cross also printed a signal on the bitcoin chart. Making reference to the previous year alone, the death cross appeared twice! Once in June 2021, and once just last January. Again, these death crosses happened quite sometime after the market tops but still they went on a bear run a little.
In summary, the death cross happens when a bullish trend reverses, and a bearish trend is underway. It can take some time for it to show, depending on how close the two moving averages are to one another. In general, the higher the bullish trend, the longer time it will take for a death cross to happen once the price starts retracing.
Meaning of a Golden Cross
Meaning of a golden cross is not far fetched. The golden cross is the inverse of what the death cross does. Most market traders tend to prefer the golden cross, as it signals the start of a new bullish trend. Explaining in opposition to the death cross, the golden cross happens when a short-term moving average crosses above a long-term moving average.
For instance, when the 50-day moving average crosses above the 200-day moving average,it signifies that the short-term trend is much stronger and dominating than the long-term trend, and therefore, the market can be said to be bullish. However, before the golden cross happens, the price must have risen quite a bit from the bearish trend.
Relationship Of Golden Cross With Stocks and Crypto
Relationship of golden cross with stocks and crypto simply helps us understand how the affect themselves. It will be nice to check a few examples of the golden cross. The chart below shows one of the best examples of the golden cross in recent history. After this golden cross, the S&P 500 went ahead to push up for close to 18 months straight. This is quite enough a strong signal! As you learnt earlier, the 50-day moving average crossed above the 200-day moving average; and the rest is history.
The golden cross doesn’t work well atimes with stocks or indices.By so doing, check out crypto for other examples of the golden cross.
Examples of Bitcoin Golden Cross
The golden cross has made strong Bitcoin uptrends before. Take a look at the chart below, a good instance of this can be found back in April 2019, after the Bitcoin bear market bottomed. The golden cross sparked an uptrend, lifting bitcoin all the way up to the high of $13k.
However, showing fake signals is also an attribute of golden cross. As you can tell in the chart below, before the moment of “COVID-Crash” of March 2020 Bitcoin already witnessed a golden cross. That was painful. The golden cross it showed in May of that year was much more successful, as it preceded the trend to Bitcoin hitting prices over $60k which was the highest rally so far.
Comparison Between Golden Cross and Death Cross
Comparison between golden cross and death cross is essential. Both the golden and death cross are easy signals to identify and use during technical analysis. However, because of the falling nature of the indicators, it may result in late response to the trend or rather fake signals. As we saw, however, the golden cross has sparked multi-month bullish trends before, so being a few weeks late might not be something to bother about.
Most people look at the daily charts for identifying golden and death crosses, but any time frame can be used when applying the idea, it just that it works more accurately on higher timeframes, at the cost of increased fall.
With reference to any other indicator, I bet you should be confident enough using this in combination with a few other indicators. Remember that too much of anything is bad,so build a system that when combined presents accurate insights into trends, trend shifts, and overall market direction.
Basically, this article has given a rundown on DEATH CROSS AND GOLDEN CROSS – TWO KEY INDICATORS IN FINANCIAL MARKETS, MEANING OF A GOLDEN CROSS, MEANING OF A DEATH CROSS, RELATIONSHIP OF DEATH CROSS WITH STOCKS AND CRYPTO, RELATIONSHIP OF GOLDEN CROSS WITH STOCKS AND CRYPTO, Examples of Bitcoins, Death Cross, etc.
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