Novice friends often hear about the concept of "golden cross" (golden cross) and "dead cross" (death cross). What is the way to distinguish it? When the concept of gold cross appeared, futures trading was not popular and was mostly used in stock trading. However, with the popular

Novice friends often hear about the concept of "golden cross" (golden cross) and "dead cross" (death cross). What is the way to distinguish it?

When the concept of gold cross appeared, futures trading was not popular and was mostly used in stock trading. However, with the popularity of online investment trading, gold crossovers are increasingly used by futures investors.

Today I will share with you the method of using the "Golden Cross" technical strategy

What is Golden Cross?

moving average "Golden Cross" refers to the cross between the rising short-term moving average from bottom to top through the rising long-term moving average. At this time, the pressure line is broken up, indicating that the price will continue to rise and the market is optimistic. The moving average gold cross refers to the price breaking through the pressure. Generally, solid lines represent long-term moving averages, dotted lines represent short-term moving averages, and short-term moving averages and long-term moving averages form two intersections.

Gold cross is a bullish signal. Therefore, for futures traders, the most important thing is to use gold cross-discovery to identify bullish markets and adopt corresponding trading strategies, such as going long based on the support level.
In fact, the gold cross itself is not a trading signal in the strict sense. It will not provide an entry point, but can only indicate that the market has entered a bullish area. Traders need to find the trading settings themselves.

In the moving average line graph arranged at the same time as the daily line and the short, medium and long-term lines, in addition to the bright bull arrangement (bull market) and short arrangement (bear market), there are more cases where several lines are entangled up and down. Here, we should pay special attention to the reversal signals displayed by the moving average line, the most famous of which are the golden cross and the death cross.

Notes

. The average quantity line is in advance or synchronized with the "golden cross". The average volume line parameters can also be set to 5-day and 10-day. When the 5-day average volume line crosses the 10-day average volume line, it means that the market trading has gradually become hot from light, buying turns strong, and the long power is strengthened, and the price rise is coordinated by trading volume. At this time, the "golden cross" resonance point of the price and volume appear, and the short-term buying signal is relatively credible.

. The timing and strength of the "golden fork". When the 10-day moving average is declining significantly, the meaning of the crossing of the 5-day moving average is not very important. When the 10-day moving average decline rate decreases, tends to stabilize, or has become flat, the "golden cross" signal has great reference value. From the perspective of strength, when there is a cross, it is easy to become a short-lived market; when there is too slow (stalemate sticky) the upward attack is not strong and there is no tension. Generally, it is more appropriate to cross the 10-day moving average at an angle of close to 45°.

. Cooperation of technical indicators, such as trend indicator (DMI), relative strength index (RSI), stochastic index (KD), etc. When the 5-day and 10-day moving averages are golden crossed, if the +DI in the rising DMI on the 14-day DMI also intersects, RSI and KD will rebound to a strong zone above 50 after bottoming out in the oversold zone. At this time, many technical indicators cooperate with the moving average golden cross to send a buy signal, and the success rate is relatively large.

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Gold cross trading strategy

Above, the above has made a comprehensive introduction to gold crossing. Let’s give an example to take a look at the specific application

Abstract daily chart of a certain variety below. The blue line represents the 200 moving average line and the red line represents the 50 moving average line. There is a golden cross in the chart with the 50 moving average rising to the 200 moving average crossing above MA (200).

Like most technical indicators, the moving average also has a certain lag. So, this means that when the gold cross on the chart appears, the market is actually already rising.

In the above chart, the price rose from 112 to 120, but compared with the previous bearish trend, the rebound is still relatively small.

Entering the market and buying at a low point after an upward trend appears in

is a very common trading method, because the slower moving average line can be used as support at this time, and the price will not fall for the time being. When the price falls back to this moving average, you can enter the market and go long.

as shown in the figure below:

The green arrow above refers to the position where you enter the market and go long.

Take profit and stop loss

In futures trading, risk control is very important.

In the figure above, you can enter long as indicated by the green arrow, because this is where the 200 moving average hits the price for the first time after the golden cross occurs.

After selecting the entry point, we need to set stop loss and take profit, that is, risk control.

as shown in the figure below:

After the long order entered the market, the market directly broke through the support of the 200 moving average.

This is a daily chart, indicating that the price decline has lasted for a while. At this time, even traders who are firmly bullish will feel panic, so they must set up their stop-profit and stop-loss.

We can set a stop loss based on the 50 moving average.

First: mark the straight line distance between the 200 moving average and the 50 moving average on the entry position, that is, the two dark blue horizontal lines in the above figure, assuming the distance is D.

Then: set the stop loss position at the position below the 200 moving average with a distance D.

After setting the stop loss, you need to consider taking profit. Take profit actually represents your risk-return rate, usually 1:2 or 1:3. We can set the take-profit to two to three times the distance from the entry point to the stop loss point.

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exit

Previously introduced how to use gold cross entry and set stop loss and stop profit. So, how do traders judge when the upward trend will end and leave in time?
needs to use the 50 moving average here, as shown in the figure above:

The purple box on the leftmost part of the gold cross. At this time, the 50 moving average exceeds the 200 moving average, indicating that the price begins to rise. After a round of price decline, the market quickly rebounded above the 50 moving average (the first purple box), officially opening a strong upward mode.

Generally speaking, when the price slowly falls back and approaches the 50 moving average support, it means that the upward trend is gradually weakening (the second and third purple boxes). If the high points cannot be created in the short term, the market is likely to reverse.

Experienced traders usually only wait twice for this situation and will be ready to leave the market the third time. Because the third time the price approaches the moving average is the earliest sign that the current trend is about to end.

In the above chart, when the price fell back to the 50 moving average for the first time (the second purple box), the price rebounded slightly, and then immediately created a higher high point, and even reached a 1:3 risk-return rate in the later stage. After the trend continued for a while (after the fourth purple box), the price began to show signs of weakness and insufficient momentum for upwards.

So, how does the price change next?

as shown in the figure below:

Price fell sharply, and a bearish signal appeared, which is the legendary death cross.

Although both the intersection of the two moving averages, the trading strategies of the death cross and the gold cross are different. This is affected by market psychology, and the market's decline is often faster than the rise.

In short, the safest way is to observe the distance between the 50 moving average and the price, and leave the market in time when the price approaches the 50 moving average for the third time.

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Last

Above is a detailed introduction to the Golden Cross and a real operation case.

But I still want to emphasize to you: a golden cross does not mean that traders can enter the market and go long immediately, but need to choose the appropriate order settings based on the trend rules.

Like all trading strategies, risk management is the most important part of the gold cross-trading strategy. After all, a trading strategy cannot be effective for everyone, so you must set risk management rules before placing an order.