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What is golden cross trading? What are the most potent golden cross-trading strategies? Read this post to get all the answers.
Do you know about the golden cross trading strategies for the crypto space? If not, there is good news for you because we will look at the top five golden cross-trading methods in the following part. These strategies could help you have a more successful trading career.
A lower-valued rolling average crosses over a higher-valued average line in a golden cross strategy, signalling a solid trend momentum. However, finding the right place to join the market using golden cross tactics is difficult. You will have a thorough grasp of the Golden Cross strategies after finishing the trading tutorial and be able to use them on any cryptocurrency asset.
What is a golden cross trading?
A technical pattern called a “golden cross” occurs when two moving averages cross, indicating that prices are likely to turn bullish. The event occurs when a short-term rolling average, which represents recent prices, surpasses a long-term moving average, which also means the longer-term trend. As a result, this indicates that prices are strengthening their positive momentum, especially when significant trading volumes accompany them. Contrarily, a death cross occurs when the short-term moving average drops below the long-term moving average.
Death crosses and golden crosses are common indicators followed by market participants and garner attention from news headlines. This is partly because this indicator is simple to use, even though it may signal action less frequently than other technical indicators. The 50-day moving average (DMA) and the 200-day moving average (DMA), which represent the short- and long-term trend lines, are widely used moving averages. Be aware that many people do not utilise the golden cross as a stand-alone indicator but rather combine it with additional tools like the moving average convergence divergence (MACD) and relative strength index (RSI), which can be easily accessed on most charts.
Best Golden Cross Trading Strategies
Double Bottom Pattern
Trading decisions made based on the crossing may not always be wise. What does it matter if a golden cross occurs yet the price declines? Contrary to your belief, this is not a misleading crossover indication.
The golden cross with a double bottom pattern technique is for you if you do not wish to miss such deals. A double bottom occurs when the price hits two equally low points. It means that despite attempts by sellers to drive the price down, bulls started moving the market higher at this point.
50 EMA Carry
As the price declines, a double bottom pattern is formed, and we can see how this happens. Nevertheless, after the breakthrough, the price shouldn’t drop below the 50 EMA in markets with strong trends.
In this instance, we seek price resistance at the 50-period EMA, which will prevent the price from falling any lower. You can place trades using the carrier of the 50 EMA.
Trading From the Event Level
As long as the market is moving above the SMA 200, we can anticipate that the bullish pressure will increase when the golden cross occurs in the market.
So, if you come across any event level following the golden cross pattern, consider it a substantial purchasing opportunity.
50 EMA Crosses Over the 200 SMA
The 50 EMA and 200 SMA are the more useful moving average numbers in the golden cross. Let’s first examine the main distinction between SMA and EMA before moving on to the trading strategy:
The SMA uses the average value to focus on the average price of the most recent number of candles. The EMA, on the other hand, concentrates on current prices. Therefore, the best indicators of price direction are EMA with a short-term frequency and SMA with a long-term value.
Mean Reversion Trading Strategy
The four trading techniques from the previous section were all trend-following techniques. There are both sellers and buyers at every price point in the financial sector. Therefore, a bearish movement could still occur even if the price rose following the golden cross.
The value and the 50-period exponential moving average strongly attract one another. They begin to converge as the distance between the weight and 50 EMA widens.
Generally speaking, the profit potential increases as the distance between the value and the 50 EMA widens.
Technically speaking, the golden cross occurs when a security’s quicker moving average crosses above its slower moving average.
Traders and investors favour the golden cross. When 50 MA passes above its 200 MA, that is the primary golden cross that everyone utilises.
Different eras can make use of a golden cross. Swing traders employ extended time frames, while day traders use shorter periods.
When the golden cross is used for extended periods, it can signal a significant change in price trend toward higher levels. The golden cross may indicate a bullish trend.
Does Crypto Trading Require a Golden Cross Strategy?
A short-term moving average crossing over a long-term moving average upward is known as a “golden cross.” It is a reliable, bullish price trend that is effective across all financial markets.
How exact is the golden cross?
A golden cross appears trustworthy because it is a trailing indicator only visible after the increased market. The lag, however, also makes it challenging to determine when a signal is erroneous until after the fact.
Is Golden cross a good indicator?
A golden cross is a bullish momentum indicator that occurs when the short-term price average of a security moves above the long-term moving average.