A crossing between two Moving Averages
You have probably come across them in a price analysis: golden cross and death cross. The terms sound heavy, and not without reason. Both can announce a shift to a bull market or a bear market. But what exactly are they? A golden cross and a death cross are both crossings between two Moving Average lines (MA). A Moving Average shows what the average price was over a certain period. A 100-day MA, for example, shows the average of the past hundred days.
One MA line already gives a good picture of how the price is moving. Two MA lines on one chart give even more information, especially at the moment they intersect. Which MA lines you use determines whether the signals say something about the short or the long term.
What is a golden cross?
A golden cross is the moment a short-period MA breaks up through a long-period MA. The most commonly used example: the 50-day MA rises above the 200-day MA.
Plenty of analysts see a golden cross as a positive signal. It can point to a structural rise in value and is sometimes seen as the starting shot of a bull market. Not everyone uses the same definition. Common combinations are:
- 50-day MA above 100-day MA
- 50-day MA above 200-day MA
The best-known historical example in the bitcoin price is at the end of October 2015. The 50-day MA broke through the 200-day MA and ushered in the bull market that would run until the end of 2017. Something else stood out afterwards: the 200-day MA acted as a support level for the bitcoin price for a long time.
What is a death cross?
A death cross is exactly the opposite of a golden cross. In a death cross, a short-term MA drops down through a long-term MA. This signal is seen as negative and can point to a structural fall in value. Some analysts consider it the announcement of a bear market.
The best-known recent example in bitcoin is in March 2018. The 50-day MA dropped through the 200-day MA, and for a long time afterwards the bitcoin price could not get back above that 200-day MA. In this period the long-term MA became a resistance level, exactly the reverse of its role during the earlier bull run.
Which time frame do you look at?
A golden cross or death cross can occur on any time frame. On an hourly chart, a crossing mainly says something about the short term. On a daily chart (the most commonly used) about the medium term. On a weekly chart about the long term.
Time frame | What does the crossing say? |
|---|---|
Hourly chart | Short-term momentum, often noise |
Daily chart | The classic MA crossing signal, this is what most analysts mean |
Weekly chart | Strong long-term signal, relatively rare |
General rule of thumb: the larger the time frame, the stronger the signal. That does not mean an MA crossing on its own is enough to base decisions on, always combine it with other indicators and context.
This article explains what a golden cross and a death cross are. It is not buying or selling advice. Technical signals always look clearer in hindsight than they do in the moment. Never make decisions on the basis of one indicator alone.
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