The Golden Cross vs. The Death Cross Explained
Compared to the golden cross, a death cross implies a downward MA crossover. This marks a definite downturn in the market and usually occurs when the short-term MA is trending down, crossing the long-term MA.
In simple terms, it is the exact opposite of the golden cross. A death cross is usually read as a bearish signal. The 50-day MA generally crosses below the 200-day MA, signaling a downtrend.
Three phases mark a cross of death. The first occurs during an uptrend when the short-term MA is always higher than the long-term MA. The second phase is characterized by a reversal, during which the short-term MA crosses below the long-term MA. This is followed by the start of a downtrend as the short-term MA continues to decline, remaining below the long-term MA.
Like the golden crosses, no two deadly crosses are the same, but specific indicators signal their presence. Here is an overview of each step of a death cross in detail. The first leg of a death cross is usually marked by an asset in an uptrend. This is followed by a weakening of the 50-day MA, the first sign that a downtrend may be on the horizon. When prices start falling after peaking, the short-term MA diverges from the long-term MA.
The second leg sees the 50-day MA move below the 200-day MA. This is a key point, as it signals that the asset could be entering a downtrend. The divergence between the two MAs becomes more pronounced as prices continue to fall. The death cross begins to form much more clearly during this stage.
The endgame is marked by the 50-day MA continuing to decline, remaining below the 200-day MA. This signals that a downtrend is indeed underway. The death cross usually brings additional selling pressure as traders liquidate their positions in anticipation of further price declines.
If, however, the downtrend is not sustained, it could mean short-lived momentum and prices rebound quickly, in which case the death cross is considered a false signal.
Compared to the golden cross, a death cross implies a downward MA crossover. This marks a definite downturn in the market and usually occurs when the short-term MA is trending down, crossing the long-term MA.
In simple terms, it is the exact opposite of the golden cross. A death cross is usually read as a bearish signal. The 50-day MA generally crosses below the 200-day MA, signaling a downtrend.
Three phases mark a cross of death. The first occurs during an uptrend when the short-term MA is always higher than the long-term MA. The second phase is characterized by a reversal, during which the short-term MA crosses below the long-term MA. This is followed by the start of a downtrend as the short-term MA continues to decline, remaining below the long-term MA.
Like the golden crosses, no two deadly crosses are the same, but specific indicators signal their presence. Here is an overview of each step of a death cross in detail. The first leg of a death cross is usually marked by an asset in an uptrend. This is followed by a weakening of the 50-day MA, the first sign that a downtrend may be on the horizon. When prices start falling after peaking, the short-term MA diverges from the long-term MA.
The second leg sees the 50-day MA move below the 200-day MA. This is a key point, as it signals that the asset could be entering a downtrend. The divergence between the two MAs becomes more pronounced as prices continue to fall. The death cross begins to form much more clearly during this stage.
The endgame is marked by the 50-day MA continuing to decline, remaining below the 200-day MA. This signals that a downtrend is indeed underway. The death cross usually brings additional selling pressure as traders liquidate their positions in anticipation of further price declines.
If, however, the downtrend is not sustained, it could mean short-lived momentum and prices rebound quickly, in which case the death cross is considered a false signal.
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