A golden cross signifies increasing bullish momentum with the potential to start a new bullish trend.
The ‘golden cross’ is a term often mentioned in trading circles due to its usefulness in spotting changes in trends while also being incredibly easy to use. This article will explain the concept of the golden cross, how to identify the golden cross and explore complementary indicators to use alongside the simple moving averages when analyzing changing trends.A golden cross occurs when the 50 simple moving average crosses above the 200 SMA.
Some may view this as a lost opportunity while others may appreciate the delayed signal as it may provide a greater level of conviction that the trend has indeed changed and we aren’t simply witnessing a short term retracement. Shorter-term traders like scalpers and day traders, seeking to capitalize on smaller moves, can make the indicator more responsive by simply reducing the short-term and longer-term moving averages when adjusting the input criteria.
Since the golden cross seeks to identify a bullish trend reversal, it makes sense to use trend following indicators after the market has broken out of a period of consolidation.: the MACD is a technical tool that averages price over a period of time. The smoothing effect this has on price charts help give a clearer indication on what direction the pair is moving.
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