In building a trading strategy, it is very important to understand and manipulate the long-term and short-term moving averages (MAs) to find a gold cross, regardless of whether you are aiming for digital assets or not. traditional assets.
Two basic but powerful signals that professional investors always look for are when the short-term and long-term MAs cross.
When these two lines cross, there will be two cases, one is we will have a Golden Cross and the asset we are watching will have a strong rally. Conversely, in a worse case scenario, it is more likely that the asset will have a new bottom in the medium term.
In the experience of professional investors, tracking the Golden Cross has helped them predict many of the worst recessions of the last century; such as the Great Depressions of 1929, 1938, 1974 and 2008.
Importantly, they highlight the potential of a major trend, allowing traders to navigate between Bitcoin (BTC)’s often noisy trends as well as the cryptocurrency market’s daily price movements.
A gold cross occurs when the short-term MA crosses above the long-term MA, signaling to traders of a strong upward move in a given asset class.
There are two main requirements for a Gold Cross, the first being an end to the strong downtrend caused by the exhaustion of bears, meaning that the bearish pressure from the bears in the market has eased. The second requirement is that the short-term MA crosses above the long-term MA, typically the 50 and 100 MA.
As you can see in the green section, a golden cross appeared on the daily chart for BTC in March, signaling a strong upside move out of the $3,122 lows, ending the decline from December 15, 2018.
Starting on March 12, the price of BTC increased by as much as 260%, from $3,859 to nearly $14,000 on June 26.
Gold crosses are most effective when analyzing long time frames such as monthly, weekly or daily charts.
Conversely, a Dead Cross is created when the bulls have been exhausted for a long time and the moving average crosses below the long term moving averages, usually the 50 and 200 moving averages.
On March 30, 2018, BTC converged on many conditions for a major drop as the 50-day MA crossed below the 200-day MA, resulting in the coin’s 54% drop in value from $6,850 to levels. bottom of $3,122 on December 15.
As with golden crossovers, dead crossovers are most effective on longer timeframes, as trends like these will need to be confirmed the next day, when they are not reversed.
However, one thing readers should keep in mind is that these indicators are not always perfect, there will be exceptions and need to be verified by others, but identifying and using transactions is not always a good idea. This cut can effectively be an invaluable rudder, helping you find your way when dealing with some of the world’s most volatile assets.
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According to CoinDesk/Coin68