The short average crosses up through the long:a golden cross, for those who watch the throng.
The point at which a shorter-term moving average (for example the 50-period) crosses above a longer-term one (for example the 200-period).
Chart readers traditionally describe it as a bullish sign, but both averages are built from past prices, so the cross appears after a rise has already happened and can be followed by a fall.
In plain words
A moving average is the average price over a set number of past periods, recalculated as each new period arrives. A golden cross is the moment a shorter moving average, commonly the 50-period, rises above a longer one, commonly the 200-period.
See it move
50-period MA has crossed above 200-period MA
Why it matters
Chart readers describe it as a sign that recent prices have become stronger than the longer-run average. Because both averages are built from past prices, the cross appears after a rise has already happened, and it can be followed by a fall.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
On an invented chart the 50-period average rises over three days while the 200-period average barely changes.
- 1Day 150-period 1.0980, 200-period 1.1000, so the short average is below
- 2Day 250-period 1.1000, 200-period 1.1001, still just below
- 3Day 350-period 1.1015, 200-period 1.1002, now above
The golden cross is recorded on day 3, the first day the short average stands above the long one.
A common mistake
A golden cross is often presented as a forecast. It is a description of what prices have already done, and markets that move sideways produce crosses that reverse soon afterwards.
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Educational information, not investment advice or a recommendation to trade.