GOLDEN CROSS STOCK: 5 Simple Steps to Applying the Golden Cross Trading Strategy

Golden Cross Stock
Image Credit TradingwithRayner

Stock investment is one of the best ways of increasing income. Many Investors efficiently use stocks to achieving their sustainable financial objectives using data-driven decisions and a strategic investment strategy. Today am gonna help you improve your trading results with golden cross stock as well as highlighting its trading strategy and how the screener works.

Its important we know what golden cross stock entails. However, lets refresh our minds to what stock really mean.

Stocks are an investment that represents an ownership share in a company. Therefore, Investors buy stocks that they assume will definetly increase in value over time. Now let’s go over to golden cross.

What is Golden Cross

A golden cross is a technical chart pattern that indicates the potential for a major rally. It 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.

Some investors take Golden Cross as an exclusive goal in the chart pattern. considering it as one of the most definite signals of a bull market. Although there is a second, converse indicator; the Death Cross which is the opposite of the Golden Cross. This Death Cross indicates a bear market going forward. Also, occurs when a security’s 50-day moving average crosses from above to below its 200-day moving average.

Stages of a Golden Cross

There are three specific stages for the Golden Cross.

  • Stage one(1) is where a downtrend exists but is on its last legs because the selling interest is being overpowered by stronger buying interest.
  • The second stage deals with the emergence of a new uptrend. This is marked when the short-term average crosses from below to above the long-term average,thereby forming the Golden Cross.
  • Lastly, in stage three(3) the new uptrend is prolonged, with continuing gains that confirm the bull market. In this phase, two moving averages both act as support levels when corrective downside retracements occur. The bull market is considered as remaining intact as long as both price and the 50-day average remain above the 200-day average.

Golden Cross Stock Screener

A Golden Cross stock screener is built to save time and pulls up all prices which make across each day. Without such a screener tool, you would have to flick through hundreds or thousands of charts each day. Be aware that for a golden cross stock screener to detect properly, the price must have been moving up for a reasonable amount of time before the cross happened. The only thing you should be considering is its effectiveness.

golden cross stock
Image Credit: Stock Monitor (Golden Cross Stock)

There are two popular settings for moving averages, mostly used by many long term investors. If you invest long term, then worry worry not about short term fluctuations in prices.In addition, when company is built on solid financials,with a steady rising trend in price, and suddenly there’s a Golden Cross, it might bring the attention of more new investors.

Anyways its obsevered that, all crosses do not mean that the stock is instantly a buy. Also for a price to pull the 50MA up to cross above 200 day average, then there must have been some significant strength in the price. So, discretion is needed.

Golden Cross trading

In golden cross trading, you will need to gather some basic information regarding the stock to be traded. It is also very important to know the current price and the 52 week high and low price. However,the 52 week high and low price of the stock represents the long-term trading trend of a stock. Carefully check the 52 week high and low price when the stock is trading at the high or the low. Before going in for trading, the cross trade must be entered in the 52 week low or the 52 week high.

A stock might only stock reach the point of the golden cross when its short-term moving average has crossed above its long-term moving average. Therefore, this point can be interpreted that rally is about to begin and when assumed that the long-term rally has begun, the right thing to do is buying to accumulate the stock. Similariry, when a stock’s short-term moving average crosses above its long-term moving average, it means that its price will rise in the future.

Furthermore, you can buy a stock when a stock’s short-term moving average hits the long-term moving average. it is essential to know the price and timing.

Read Also: PUT OPTIONS: How to trade put options in simple steps

Golden Cross Trading Strategy

A golden cross trading strategy is based on the long-term trend of the stock. When the long-term trend rises, the golden cross should be traded. Only those stocks that show golden cross are to be bought for accumulating portfolio. This is because when the stock market goes through ups and downs, it makes buyer loose potential profit before the price falls or selling them before it rises in the short-term trend of the stock.

Trading strategies, perform well under specific market conditions; the best trading strategy is always the key point. However, you can pick a trading strategy based on your personality type, level of discipline, available capital, risk tolerance and availability.

#1. Seek for Setups after a Long Down Trend. Almost all golden cross setups are not equal. One easy method you can use is to wait for a stock that has had a long sustainable downtrend.

#2. Always ensure there are no wide Spreads Between Moving Averages. Thus it presents a cup and handles like the formation of the averages. Thereby looking really bullish on the surface. However, looking at the price action, you will notice an unhealthy pattern. First,

#3. Finally, ensure you combine double bottom Patterns with Golden Cross. This strategy covers combine the double bottom chart formation with the golden cross.

Other General Trading Strategies Include;

  • News trading strategy.
  • End-of-day trading strategy
  • Swing trading strategy
  • Day trading strategy
  • Trend trading strategy
  • Scalping trading strategy

Summary

Finally, the golden cross appearance on a chart doesn’t actually mean that traders should go long at that very moment. Instead, they should focus on buying a dip with the rules of a trend. The golden cross trading strategy also revealed a unique way of trading golden cross stock. Moreover, it alerts traders to book the profits and exit the trade as quickly as possible.

Therefore, without integrating these strategies, traders will continue to struggle in the stock market. We recommend that you make experiments on time combinations to ascertain which works for you. This can be achieved by taking advice from stock experts or using the right software.

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Disclaimer!

Any information contained in this article is based on the authors’ personal opinion research. This article should not be treated as trading advice. We shall not be held liable for any results of the trades arising from relying upon the trading recommendations and reviews contained in this article.

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