Golden Cross Investing Strategy

STRATEGY DESCRIPTION

Think of moving averages as smoothing out price data. They allow you to see the underlying trend, stripped of the day-to-day noise. A 50-day moving average reflects a shorter-term trend, while a 200-day moving average gives you the longer-term outlook. The Golden Cross strategy kicks in when these two averages intersect. Specifically, it’s when the 50-day moving average moves above the 200-day moving average – a bullish signal suggesting that the tide is turning and upward momentum may be building.

The Golden Cross is a classic technical strategy that is widely used and proven very reliable. Given its popularity, the idea of mass psychology becomes very important to its success. The Golden Cross symbolizes a shift in investor sentiment, a swing from bearish to bullish. When more investors start seeing this upward trend, it can become a self-fulfilling prophecy, pushing prices even higher.

Timing is crucial, and the Golden Cross Strategy works best when we’re transitioning from a bear to a bull market, where the upward momentum is just starting to gather steam. It’s less effective in a sideways market or a deeply entrenched bear market. Also, remember that the Golden Cross is a lagging indicator – it reflects a change that has already started to occur. So while you wont hit the exact top or bottom of the market you will spot an upward trend and be able to jump aboard.

WHAT YOU WILL LEARN

This is a Technical Analysis indicator. In essence, it’s a signal to go long on the asset. The aim is to ride the anticipated upward wave, selling when the market hits your target or when a reverse pattern – a Death Cross appears, where the 50-day moving average drops below the 200-day.

It’s important to note that the Golden Cross Strategy isn’t a standalone strategy. It’s a tool, and like any tool, it’s more effective when used in combination with others. So, complement the Golden Cross with other technical indicators or fundamental analysis for the best results.

You will learn about implementing a technical strategy and using it to compliment your overall portfolio.

For more on Technical Analysis view out two courses Technical Analysis 1 and Technical Analysis 2

LEARNING OUTCOMES

The Golden Cross represents an opportunity, a sign that the bulls might be taking over the market. It’s a strategy that combines simplicity, ease of use, and a degree of reliability that makes it an excellent addition to any investor’s toolkit. By studying this Strategy you will be able to apply it to any stock or ETF you are holding or considering adding to your portfolio. You will know when the optimum entry point is to maximise your upside potential. This is an essential skill to optimise the performance of your investments.