The most popular and simplistic way to use moving averages is to divide the market into a bullish
or a bearish
one based on a cross. Even today, financial newspapers refer to these crosses as being really important and defining for a market. In order to look for a golden or a death cross, a daily timeframe
needs to be open on the financial product one is interested in trading. In our case, let’s use the daily chart
on the BTC
/USD. The next thing to do is to apply two different moving averages on the chart: one that takes into account 100 as a period (MA100), and one that considers 50 as a period (MA50). This means that MA100 is plotting a value based on the values of the last 100 days, while the MA50 one is taking into account only the last 50 days.
The overall idea to interpret a market is quite simple: When the MA50 moves above the MA100, or it makes a cross, this cross is called a golden cross. It means that from that moment on the overall market turned bullish
, and so buyers should dominate that market. The opposite is true as well: When the MA50 crosses the MA100 to the downside, the cross that is formed is called a death cross, and signals a bearish
environment in the period ahead. The BTC
/USD chart below shows both golden and death crosses, as the MA50 (the red line) crosses above or below the MA100 (the white one).
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