Intra Day Moving Average Cross

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Golden Cross Definition

What is a Golden Cross?

The golden cross is a candlestick pattern that is a bullish signal in which a relatively short-term moving average crosses above a long-term moving average. The golden cross is a bullish breakout pattern formed from a crossover involving a security’s short-term moving average (such as the 15-day moving average) breaking above its long-term moving average (such as the 50-day moving average) or resistance level. As long-term indicators carry more weight, the golden cross indicates a bull market on the horizon and is reinforced by high trading volumes.

Key Takeaways

  • The golden cross is a technical chart pattern indicating the potential for a major rally.
  • The golden cross appears on a chart when a stock’s short-term moving average crosses above its long-term moving average.
  • The golden cross can be contrasted with a death cross indicating a bearish price movement.

What’s a Golden Cross?

What Does a Golden Cross Tell You?

There are three stages to a golden cross. The first stage requires that a downtrend eventually bottoms out as selling is depleted. In the second stage, the shorter moving average forms a crossover up through the larger moving average to trigger a breakout and confirmation of trend reversal. The last stage is the continuing uptrend for the follow through to higher prices. The moving averages act as support levels on pullbacks, until they crossover back down at which point a death cross may form. The death cross is the opposite of the golden cross as the shorter moving average forms a crossover down through the longer moving average.

The most commonly used moving averages are the 50-period and the 200-period moving average. The period represents a specific time increment. Generally, larger time periods tend to form stronger lasting breakouts. For example, the daily 50-day moving average crossover up through the 200-day moving average on an index like the S&P 500 is one of the most popular bullish market signals. With a bellwether index, the motto «A rising tide lifts all boats» applies when a golden cross forms as the buying resonates throughout the index components and sectors.

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Day traders commonly use smaller time periods like the 5-period and 15-period moving averages to trade intra-day golden cross breakouts. The time interval of the charts can also be adjusted from 1 minute to weeks or months. Just as larger periods make for stronger signals, the same applies to chart time periods as well. The larger the chart time frame, the stronger and lasting the golden cross breakout tends to be.

Example of a Golden Cross

As a hypothetical example, a monthly 50-period and 200-period moving average golden cross is significantly stronger and longer lasting than the same 50, 200-period moving average crossover on a 15-minute chart. Golden cross breakout signals can be utilized with various momentum oscillators like stochastic, moving average convergence divergence (MACD) and relative strength index (RSI) to track when the uptrend is overbought and oversold. This helps to spot ideal entries and exits.

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The Difference Between a Golden Cross and a Death Cross

A golden cross and a death cross are exact opposites. A golden cross indicates a long-term bull market going forward, while death cross signals a long-term bear market. Both refer to the solid confirmation of a long-term trend by the occurrence of a short-term moving average crossing over a major long-term moving average.

The golden cross occurs when a short-term moving average crosses over a major long-term moving average to the upside and is interpreted by analysts and traders as signaling a definitive upward turn in a market. Conversely, a similar downside moving average crossover constitutes the death cross and is understood to signal a decisive downturn in a market. Either crossover is considered more significant when accompanied by high trading volume. Once the crossover occurs, the long-term moving average is considered a major support level (in the case of the golden cross) or resistance level (in the instance of the death cross) for the market from that point forward. Either cross may occur as a signal of a trend change, but they more frequently occur as a strong confirmation of a change in trend that has already taken place.

Limitations Of Using The Golden Cross

All indicators are “lagging,” and no indicator can truly predict the future. Many times, an observed golden cross produces a false signal, and a trader placing a long at that time could subsequently find himself in some near-term trouble. Despite its apparent predictive power in forecasting prior large bull markets, golden crosses also do regularly fail to manifest. Therefore, a golden cross should always be confirmed with other signals and indicators before putting on a trade. The key to using the golden cross correctly – with additional filters and indicators – is to always use proper risk parameters and ratios. Remembering to always keep to a favorable risk-to-reward ratio and to time your trade properly can lead to better results than just following the cross blindly.

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Using Technical Analysis for Immediate Profits

Contrary to popular belief, technical indicators make trading easier, not more difficult. While new traders may see jagged lines and multi-colored trends, picking up a technical indicator and using it to trade is easier than it looks.

Moving Averages

The most simple of all the technical indicators, moving averages are used by a wide variety of traders and investors to help forecast the future direction of the markets. Some common moving averages are the 20, 50, 100, and 200 day moving average settings.

There are two very common ways to use moving averages as technical indicators. The first method is to use a single, 200 day moving average as a buy and sell cross with the price. When the price is above the 200 day moving average, the market is bullish. When the price is below the 200 day average, the market is bearish.

The next strategy is an alternative version of the first. Using a 50 day moving average and a 200 day moving average, traders have a very powerful technical indicator at their disposal. When the 50 day moving average crosses above the 200 day, the market is bullish. Likewise, when the 50 day moving average crosses below the 200 day moving average, the market is bearish.

This very simple indicator is known and used by traders around the world. In fact, one of the most important market phenomena, the death cross, is a product of the 50 and 200 period moving average cross.

Using Moving Averages as Support and Resistance

Hand drawn support and resistance lines are technical indicators, but the moving average can be used as support and resistance as well.

The 10 week moving average works excellently to provide support when the price is higher than the current moving average. Alternatively, it acts as resistance when the price is below the current moving average reading. A break below or above the 10 week moving average should be treated like any other technical indicator breakout.

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Whereas the longer term (100 and 200 day) moving averages tend to provide a long term bull/bear view, the shorter term averages often provide the most support. The most popular short term support and resistance averages are the 20 and 50 day averages, as well as the 10 and 26 week averages.

You’ll notice that the 26 week moving average is one of the few that does not rest on an even 5 or 10 week period, but that’s because its meant to track a half year, rather than a certain number of weeks or months.

An Average for Every Security

Each security will have a moving average that works best as a technical indicator. For instance, bonds, which are typically slow moving and have little intra-day price action, are usually monitored with longer term averages. Stocks, on the other hand, are often observed with shorter averages.

There is perhaps no other more useful, but basic, technical indicator than that of the moving average. Moving averages allow investors to see the current market price compared with the average price trailing a determined amount of periods.

Intra Day Moving Average Cross

Moving Average is most used of all technical indicators. It is widely known opinion that it is on the moving averages traders have earned much more than all the other indicators.
It is used a moving average to generate trading signals. The lot size is set by a special algorithm, and the opening position is carried out according to the moving average.
This advisor analyzes moving average changes and the graphics market price. Verification is performed with a special function programmed in the adviser. Opening a position to buy is implemented if the moving average is above the opening price and below the closing price. In case the moving average is below the opening price and above the closing price, the position is opened up for sale.
Money management is very simple and effective: the opening of the next position implemented on the basis of previous results. Lot size is calculated based on the maximum acceptable risk.
Moving Average Expert Adviser is more suitable for use on a daily chart D1.

To learn more about this Expert Advisor and download its source code on MQL4 you can here:

Schedule of Balance:

Here is a detailed report of the “Moving Average” Expert Adviser.

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