Golden Cross and Death Cross
Moving average crossover signals: a golden cross occurs when a shorter-term average crosses above a longer-term one, while a death cross is the reverse, often watched as a long-term trend signal.
A golden cross occurs when a shorter-term moving average (see Kaavon's "Simple Moving Average (SMA)" glossary definition) crosses above a longer-term moving average, commonly the 50-period and 200-period averages, widely interpreted as a bullish signal suggesting a longer-term uptrend may be beginning. A death cross is the mirror case, occurring when the shorter-term average crosses below the longer-term one, widely interpreted as a bearish signal suggesting a longer-term downtrend may be beginning.
Because both signals rely on long-period moving averages, they're inherently lagging indicators, often confirming a trend shift well after it has already begun — critics note that by the time a golden cross or death cross actually triggers, a meaningful part of the move it supposedly signals may have already occurred. Despite this lag, both signals remain widely watched and discussed, in part because of their simplicity and in part because of a degree of self-fulfilling attention, since enough market participants watching for the same well-known signal can itself contribute to the move that follows.
Examples
- A golden cross forming when the 50-period moving average crosses above the 200-period moving average is widely watched as a signal that a longer-term uptrend may be beginning.
- Critics note that both the golden cross and death cross are inherently lagging signals, since by the time either one triggers, a meaningful part of the underlying move may have already occurred.