Commoney Wise
  • News
  • Politics
  • Business
  • Finance
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Futures
    • Forex
  • Crypto
  • Price Index
    • Stocks
    • Cryptocurrency
    • Commodities
    • Forex
  • Videos
  • Login
  • Register

  Breaking
European stocks and US futures slip after week-long rally February 3, 2023
Big Tech groups disclose $10bn in charges from job culls and cost cutting February 3, 2023
3M investor raises concerns about company leadership February 3, 2023
Australia introduces classification for crypto assets February 3, 2023
US Dollar to weaken this year, with periods of volatility and bouts of strength – MUFG February 3, 2023
Next
Prev

en English
en Englishes Españolde Deutschfr Françaisit Italianopt Portuguêsru Русскийzh-CN 简体中文hi हिन्दीja 日本語
Casino
  • News
  • Politics
  • Business
  • Finance
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Futures
    • Forex
  • Crypto
  • Price Index
    • Stocks
    • Cryptocurrency
    • Commodities
    • Forex
  • Videos
No Result
View All Result
Commoney Wise
Casino
  • News
  • Politics
  • Business
  • Economy
  • Finance
  • Investing
  • Markets
  • Crypto
  • Tech
  • Videos
Home Crypto

What is a golden cross pattern and how does it work?

Staff by Staff
December 13, 2022
in Crypto
0 0
A A
0

A golden cross pattern on the charts excites crypto traders for its promises of profitable opportunities ahead, largely due to its impressive success rate in traditional markets.

The golden cross tends to preceded sustained uptrends in contrast with the bearish death cross pattern. For instance, since 1970, the S&P 500 has been returning about 15% gains on average in less than a year after a golden cross’s occurrence.

The golden cross’s record in the benchmark crypto asset Bitcoin (BTC) is similarly impressive. Notably, the indicator has appeared seven times on Bitcoin daily charts since 2010, out of which five have led to massive bull runs.

What is a golden cross pattern?

Before discussing the golden cross, let’s discuss its core component known as moving averages (MA).

A moving average records the average change in an asset’s price over a specific period. Mathematically, they are measured after adding a set of prices (recorded in a fixed timeframe such as hourly, four-hour, daily, weekly, monthly, etc.) — and by dividing the sum by the number of prices in the set.

Moving average examples

Traditionally, golden cross watchers focus on two specific moving averages: the 50-day moving average, which becomes the short-term MA, and the 200-day MA as the long-term moving average.

A golden cross pattern forms when the short-term MA crosses above the long-term MA. In other words, the pattern shows that buying interest in a particular market has risen over the previous 50 days, compared to the previous 200 days.

Golden cross illustration

How does a golden cross work?

Golden crosses typically precede significant price rallies across traditional and crypto markets, a reason why traders perceive them as buy signals.

BTC/USD daily price chart featuring March 2020 golden cross and a ~750% rally afterward. Source: TradingView

But there have been cases where golden crosses have been followed by fake breakouts. Therefore, one should consider the golden cross pattern alongside other technical indicators before making a decision.

For starters, traders can employ the relative strength index (RSI), a momentum oscillator that determines an asset’s overbought and oversold conditions, to predict potential price pullbacks.

Related: What is a Doji candle pattern and how to trade with it?

In February 2020, this strategy may have helped many traders avoid deeper losses. Let’s see why. 

On Feb. 1, 2020, Bitcoin’s 50- and 200-day MA formed a golden cross when it traded for around $9,500. A modest euphoria followed, and the price moved to as high as $10,500 in the next two weeks. The period also saw Bitcoin’s daily RSI rise above its overbought threshold of 70.

BTC/USD daily price chart with fake golden cross breakout. Source: TradingView

Bitcoin’s overbought conditions resulted in a decline toward its 50- and 200-day MA (the $8,500-$9,200 range). But its price eventually collapsed below $4,000 entering March, in line with a global market meltdown led by the beginning of the Covid-19 pandemic.

The case study explains that golden crosses are not 100% accurate in predicting future trends. Instead, they could merely assist traders and analysts by employing momentum indicators as well as fundamentals to forecast price actions in the short and long term. 

These momentum indicators could include Moving Average Convergence Divergence (MACD), Stochastic RSI, Rate of Change (ROC), Average Directional Index (ADI), and others.

In other words, traders are advised not to buy too early into a golden cross formation. Instead, they could wait for the price to consolidate sideways or lower and find short-term support before deciding to enter a trade.

It’s possible to also alter the definition of a golden cross in volatile market conditions by changing moving averages.

For instance, using the 20-period MA for the short-term MA and the 50-period MA for t long-term MA. The 20-50-day MA combination has historically helped traders determine short-term crypto market trends, as shown below in the March 2020-November 2021 bull run.

BTC/USD daily price chart featuring 20-50 MA crossovers. Source: TradingView

Golden crosses don’t mean guaranteed gains

While golden crosses frequently do indeed appear before major price rallies in Bitcoin and cryptocurrency markets, the risk of bulls falling into a trap remains. 

Ultimately, traders should be cautious with crossover signals, as blindly following them might result in losses. As discussed above, false signals can occur and it’s important to confirm any golden cross with additional technical indicators before making any trades.

Read the full article here

ShareTweetSharePinShareSendShare
https://www.madmoneycasino.com/?faff=667&sub=DemCasino

Related Articles

Crypto

Australia introduces classification for crypto assets

February 3, 2023
Crypto

Fantom Price Prediction as Bullish Roadmap is Revealed by Andre Cronje – Can FTM Reach $10?

February 3, 2023
Crypto

Binance re-enters South Korea with GOPAX exchange

February 3, 2023
Crypto

North Korean Defectors, Libyans Indicted for ‘Kimchi Premium’ Crypto Trading

February 3, 2023
Crypto

Ray Dalio says Bitcoin is not the answer; the community responds

February 3, 2023
Crypto

Terra Luna Classic Price Prediction as LUNC Pumps Up 18% in 24 Hours – New Bull Market Starting?

February 3, 2023
Load More

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Commoney Wise

Commoney Wise is your one stop news website for the latest finance, business and crypto news, follow us to get the news that matters to your minute by minute.

Our Other Brands Kronosslott, Commoneywise, Demcasino.de, SportsExtremes.tv, Slotgamesusawwr, Coin Desk Times, Kingsofgolf.be

Topics

Business Commodities Crypto Economy Finance Forex Futures Investing Markets News Politics Stocks Tech Videos

Get Informed

The most important world news and events of the day

Be the first to know latest important news & events directly to your inbox.

By signing up, I agree to our TOS and Privacy Policy.

  • Privacy
  • Terms
  • Press
  • Advertise
  • Contact

© 2022 Commoney Wise. All Rights Reserved.

No Result
View All Result
  • News
  • Politics
  • Business
  • Finance
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Futures
    • Forex
  • Crypto
  • Price Index
    • Stocks
    • Cryptocurrency
    • Commodities
    • Forex
  • Videos

© 2022 Commoney Wise. All Rights Reserved.

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.