A Golden crossover is a Technical way of forecasting the market using moving averages. Some traders and investors often combine it with other indicators and methods so that their risk reward ratio is favorable.
Most of the techniques in technical analysis can be used from 1min time frame to a monthly time frame horizon. There are no specific tools which are only to be used in monthly or weekly timeframe’s. It’s about ‘how you want to use it according to your own trading and investing style?’
Getting straight to the point; Golden crossover happens when, short to medium term 50DMA crosses the long term 200DMA.
DMA- Displayed moving average.
Almost all the charting platforms provide this tool for free and you just have to plot these averages and look for 50DMA crossing 200DMA from below.
Majorly after a golden crossover in higher timeframe like weekly and monthly we can expect at least 2-3 years of bull market or more depending on other economical factors.
This is one of the best method’s to forecast the market phases and take positions accordingly. The rationale is also very simple: Let’s understand it with the help of example here- When price crosses 50DMA, It simply means that the last 50 day average price is crossed which was earlier acting as a resistance and now we can expect the next phase to be bullish or sideways with bullish bias.
In the same way when 50DMA crosses 200DMA, It means that the last 50 days average price has crossed above 200DMA and price is also above both of these averages.
We take it this way that the supply of over 50 and 200 days is now being cleared and a strong rally upside is due.
In the above chart red cord is 50DMA and blue cord is 200DMA and it’s quite clear what happened after the crossover.
We’ve explained this chart completely combining the other methods of estimating the next move because that’s where money is made. Isn’t it?
Link- https://www.tradetales.in/nifty-smlcap-100/
Do tell us in the comment box where you saw a golden crossover happening and how you traded it?
Disclaimer- This blog is for educational purposes only. Kindly refer to your financial advisor before taking decisions.
PEACE.