A Golden Cross is a Technical Analysis (TA) indicator that appears when the 50-day moving average surpasses the 200-day moving average of a particular asset. It is often viewed as a bullish signal, particularly in stock shares, as the market tends to rise over the next 6 to 12 months.
There are mainly three stages to a Golden Cross:
- A downtrend that eventually ends as selling is exhausted.
- The shorter moving average crosses above the longer moving average.
- A continuing uptrend that ideally leads to higher prices.
Both Simple Moving Average (SMA) and Exponential Moving Average (EMA) pairings can be used to create a Golden Cross. For additional confirmation, some traders look for significant trading volume accompanying the Golden Cross.
