The Golden Cross and the Death Cross
Using both a Death Cross and a Golden Cross as indicators is a powerful trading strategy in the foreign exchange market. With the combined powers of two effective technical tools, racking your brains when you analyze charts is unnecessary. Its approach is straightforward: it points out profitable moments to enter and exit the industry. Since many novice and professional traders can attest that the fx technique can do wonders, why not get to know more about its elements?
What Is a Death Cross & a Golden Cross?
A Death Cross indicates a crossover that can be obtained from a security’s short-term and long-term moving averages. It follows that when the short-term moving average goes below the long-term point, you can anticipate a downward trend. An example would be a 20-day moving average failing to reach a 150-day moving average. Although there is an ongoing one, it is a sign that you will be in a bearish market shortly since an upward trend is nearing its end.
On the other hand, a golden cross is the opposite of a Death Cross. It is a crossover that supports either a turnaround to a downward direction or an upward trend. It occurs when the short-term moving average peaks into the long-term moving average. For instance, if a 20-day moving average goes above a 150-day moving average, you’re invited to enter a bullish market.
The Plus Side
The use of a Death Cross and a Golden Cross altogether is a popular trading strategy. Since both indicators are familiar to many traders, you won’t be having a difficult time getting all sorts of information about it.
Advantages of using the strategy:
- It is easy to use. All you need to do is monitor technical analysis charts and keep an eye open for short-term and long-term moving averages. Whenever the former crosses or does not cross the latter, you can determine your current position.
- It is known to return accurate results. Despite needing time and practice, analyzing charts based on moving averages can be rewarding. When accomplished correctly, you can rest assured that the idea of profiting big in the forex market is far from impossible.
You Could Use a Tip
It’s recommended to use a Death Cross and a Golden Cross in conjunction to other indicators to increase reliability. At times, you may discover that the information you gathered is in conflict with the others when using just the two. In such a case, you’ll need to confirm results by re-analyzing a chart. Although each tool in the combo is already powerful on its own, additional help won’t hurt.
Credit: Some parts of the article have been taken from http://www.mtrading.eg