trading

golden cross

A bullish technical signal when a short-term moving average (typically 50-day) crosses above a long-term moving average (typically 200-day).

Example

“When the S&P 500's 50-day moving average crossed above the 200-day, the golden cross triggered buying from technical traders.”

Memory Tip

GOLDEN CROSS = the 50-day crosses ABOVE the 200-day. Golden = bullish. Buy signal.

Why It Matters

The golden cross can help individual investors identify potential trend changes in stocks or funds they own or are considering buying. Understanding this signal may help you make better decisions about when to enter or exit positions, potentially improving your investment returns over time.

Common Misconception

Many people believe that a golden cross guarantees a stock will go up, but it is only a signal that suggests upward momentum may be developing. The signal can be false, and prices can still decline even after a golden cross occurs, so it should be used with other analysis tools.

In Practice

Imagine a stock trading at 45 dollars with a 50-day moving average of 48 dollars and a 200-day moving average of 44 dollars. When the 50-day average crosses above the 200-day average, a golden cross occurs, and many traders may buy, potentially pushing the price toward 55 dollars or higher in the following weeks.

Etymology

GOLDEN (positive, favorable) CROSS (where two lines intersect). A CROSS that is GOLDEN (bullish).

Common Misspellings

golden-crossgolden crrossgoldenncross

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