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Golden Cross Explained: Why most traders get it wrong (and how it really works) | Forex Training

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Golden Cross Explained: Why most traders get it wrong (and how it really works) | Forex Training

hey hey what’s up my friend so in today’s video I want to share with you on how the golden cross right can help you improve your trading results but first what is the golden cross right some of you you know might have heard this term before on the news media it’s a try no see the SMP just performer golden cross the markets are now bullish yada yada what is it right so the golden cross occurs when the 50-day moving average crosses above the 200-day moving average and there’s another phenomenon called the death cross is when the 50-day moving average crosses below the 200-day moving average so just an example you can see over here this is a golden cross the blue line here is the 50 ma this is the 200 ma this is where the 50 ma crosses above the 200-day moving average so this is where we say don’t the market has just performed oil golden cross so here’s the thing does this a golden cross and you know validity does it really work so let’s look at some of the findings right since the 1930s so this is the sauce that I got this table from so basically this is where the number of times that a Golden Cross has a cut on the SMP during 1930 1935 1939 1940 etc until 2009 so you can see that what they did is that whenever the market did perform a Golden Cross right what is the result one month later what is the result two months later what is the results three months later in six months in one year so we can see that they check right what are the returns one year one month later two months three months six months and a year so generally when you look at this as a whole we can see that whenever a Golden Cross has a cut right six months to a year later which is this this column over here okay the market generally still remains bullish so this is why you see there are more green and red over here because it tells you that generally whenever Golden Cross of curse right you can expect that six months from now or twelve months from now right the market will be higher than where it is right now okay so yes right there is some validity right to the Golden Cross some of you now might be know ticking okay there is a significant in a golden cross so why not I just buy when the 50 crosses above the 200-day moving average right there should be a winning strategy right so not so fast my young padawan because when the market is in a range right you get whipsaw pretty badly now I’m not saying that this strategy cannot work because I’ve seen this type of strategy work for systematic trend followers alright but if you are not a systematic trend follower don’t try to trade me a moving average cross over you know you probably get in a whip shot to death right and it’s really you know not something that I would suggest okay so be aware of you know blindly trading the Golden Cross because when the market is in a range you can get whips up okay alright to death so how should you then you know trade the Golden Cross so one suggestion right is you can use it as a trend filter so you know that when the market right forms the Golden Cross right I mean look in the data in the SMP is that the market tends to remain bullish for six months to a year from now so what you can do is that use it as a trend filter whenever the market or rather whenever the 50 crosses above the 200-day moving average you will look for buy signals only means you have a permission to go long okay you can look for buying opportunities whenever a Golden Cross has occurred likewise right if you are you know trading stocks right in a def crosses occurred right what do you want to do is do no sell all your positions and remain in cash because whenever a def cross a curse right there’s a good chance that the market could be in for a correction or maybe even worse a recession so this could be a simple trend filter to keep you in cash to keep you in a defensive mode right when the market is showing sign of weakness and if you trade forex or futures right this can even be a permission for you to go shot on the markets okay so that’s the first thing that you can do second thing right how can you actually better time your entry right when trading with the Golden Cross so here’s an example so over here I can see that at this point this is the dollar gives a Chinese yen you have this Golden Cross a cut somewhere round of 6 July okay where the blue line crosses above the black line where the 50 cross above the 200-day moving average so what you can do is that now right you have the permission to go along right because the market is showing signs of it’s bullish so what you can do is that you don’t necessarily want to be trading off this this particular timeframe because sometimes the market can be very overextended already and if you’re buying right after the Golden Cross just occurred right you’re buying at very high prices so what you can do is use multiple time frame analysis I to help you better time your entry so again this would firstly serve as a trend fielder right number one Golden Cross it’s just a cut on a daily time frame number two will go down to a lower timeframe right to better time our entry and in this case right we can go down to the for what time frame and look at her and look for trading setup so earlier we saw that six of July was where the was where the Golden Cross occurred which is somewhere about okay let’s find this six of July yup somewhere here okay so somewhere in this region right big golden crosses occurred so looking at a forward timeframe right you can see that there is actually no trading opportunities that you can trade off right using the bias you hit on the higher time frame so for example you can see that over here okay I have plotted a line over here right just let me just get rid of this right I just draw my tool I can see over here there’s an area of support over here right so earlier try the Golden Cross I believe it occurred right somewhere in this region so you can see that on the four hour time frame the price coming to this came into this area of support right then it did a Falls break traded below support annum break and closed higher so this is a valid falls break setup that you can use to train and go long and on top of it right you saw that on a higher time frame the daily time frame the market is in an uptrend we had a golden cross so you can use this on knowledge right and a back of your head right and then go down to the forward timeframe to better time your entry so this means that you can go along on the next candle over here have your stop-loss like 180 are below this low right and again depending what time of trading setup it is right whether you write a trend or capture swing that’s entirely up to you but you can see that how you can actually use the Golden Cross like to help you know better time your entry right using it as a trend filter okay so this is just one example right of our using the Golden Cross and then using it on multiple time frames will help you know better time your entries so moving on right how can you use the Golden Cross to write trends right again same concept you know that whenever the 50 crosses above the 200-day movie in rich right it’s a sign of strength so what you can do is that you can hold on to your position right until the 50 crosses below the 200-day moving average so in this case you can see that let’s say for whatever example right you went along on the break of this highs etc okay you can actually write this trend right until the market all right out until the Deaf cross a cut over here where the 50 crosses below the 200-day moving average so you can see that this Golden Cross concept right can also help me write massive trends in the market so all in all right this is a very versatile concept that you can use to you know time your entries you see as a trend filter or even help you write massive trends in the markets so let’s do a quick recap shall we number one a golden cross occurs when the 50-day ma crosses above the 200-day MA and the DEF cross is when the 50 crosses below the 200-day MA number two I would suggest don’t rate a crossover blindly because right you might get whipsawed in a range market instead a better way to use the golden crosses use it as a trend filter right you can even use a multi Perl multiple time frame analysis right going down to a lower time frame to better time your entries all right and lastly you can also use the Golden Cross right to help you write massive trends in the market okay so with that’s it I’ve come towards the end of this video I hope you got value out of it right and if you’ve enjoyed this video hit the like button subscribe to my youtube channel and if any questions leave it below and I’ll do my best to help so that’s it I wish you good luck and good trading I’ll talk to you soon you

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