This occurs when a short-term moving average (such as the 50-day MA) sharply rises and crosses over the longer-term moving average (such as the 200-day MA. Golden cross stocks are considered to have a bullish breakout signal. And the result: A fixed trend you can track over a specific time frame. Investors and traders alike, love moving averages because they strip out the intra-day volatility of a share price (“noise”). With hundreds of different indicators, it’s hard to figure out which one to tune in to, and your brain becomes a muffled mess. Have you ever tried to tune your radio to your favorite station, but for whatever reason, you seem only to get static?Ī scenario like this is, unfortunately, all too common in the trading world. Why Do Traders and Investors Like Golden Crosses So Much?
Yes, I know, that’s a lot to take in, but trust me, this info is going to be golden. In their most basic form, a moving average takes the closing price of a stock (from each of the previous days), over a given period- let’s say 50 days and then divided it by the same number of days (50 in this case) to arrive at an average.Īs each day passes, the entire data is updated, which is what makes it a “moving” average. To understand the concept of a golden cross, and trading golden cross stocks, you first need to come to grips with the idea of moving averages. Golden Cross on a stock chart: Moving Averages Create it
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