Golden Crossover is a trading signal that indicates momentum and it’s a good time to buy a stock for swing trading and short-term trading.
It indicates that the price will likely go up for a few days or weeks. It’s a good signal to buy the stock (Bullish).
This signal appears on the chart when the 50 Moving Average (short term) cuts and crosses above the 200 Moving Average (long term) from down to upwards.
When the short-term moving average crosses above the long-term moving average, it signals an upcoming uptrend of the stock.
Many swing traders and short-term traders use this crossover (50 aur 200 MA ki mulaqaat) to enter long positions in a stock for potential profits.
This helps them to identify ‘Buy Signals’.
Benefits of Golden Crossover
(1) Helps You to Identify the ‘Buy Signal’: As discussed above.
(2) TREND Confirmation: The Golden Crossover can confirm that a stock’s price will potentially keep rising for a while.
This gives you more confidence to buy the stock, knowing that the trend is in your favor and the ball is in your court.
(3) Helps You Even to Plan Your Exit:
It not only provides you with a buy signal, but also indicates when you should book the profit!
Once you buy the stock after a Golden Crossover, you can use the same signal to help you decide when to sell.
You can hold the stock until the 50MA doesn’t cut and falls below the 200MA. Make sure to book profits before this.
When the 50 MA cuts and falls below the 200MA, this is known as the “Death Crossover” i.e. ‘Sell Signal’.
It’s the opposite of the golden crossover strategy. So make sure to plan your exit and book your profits before this as per your targets.
You can set a stop-loss on the price at which you’ll sell the stock if it drops too much to limit your losses. So this crossover even gives you the sell signal and helps you to identify the stop loss.
(4) Double-Confirmation: Smart traders don’t just rely on a single signal or the Golden Crossover alone.
They also look for other confluences like the trading volume, momentum, price action, support & resistance, etc.
- (i) If there is strong volume and
- (ii) the market structure is also positive along with this crossover, then it’s a double confirmation that the momentum is strong and entry can be taken.
- (iii) Many even use indicators for confirmation before making an entry. But I just prefer price action for the confluences.
(5) Managing Risk: Even with a Golden Crossover signal, trading still involves risk.
You should take care of the quantity you’re buying and always trade with risk management.
Just invest a small portion of your total money, and be prepared to accept the loss if the trade doesn’t work out as expected. You just lost a calculated loss.
“Losing a finger is better than losing the whole hand”.
Bottom Line
The Golden Crossover is a signal that a stock’s price might be going up for a while and the death crossover is the opposite of it.
This strategy can be used for swing trading, short-term, and even intraday trading to buy and sell stocks.
Use this along with the price action and outperform those who just rely on the indicators and this crossover alone.
Nothing is 100% and This will just provide you a confirmation and increase your probability.
No matter which strategy in the world you use, use it along with risk management.