Death Cross vs. Golden Cross
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Technical analysis in the crypto space, or any trading market, is complex. Traders and analysts often name trading terms and phrases in a complicated way where it makes any new traders head spin. In this blog, we will dig into two technical indicators one being the feared "death cross", and the other is the "golden cross". These two technical indicators incline to be less common than the daily trading tools used by active crypto traders. Still, when they happen, these two technical indicators can be an essential indicator of a change in the long-term trend.
The death cross is usually advertised as a threatening trading indication during descending crypto price action, representing a potential significant downward movement. The death cross occurs on price charts when two exact moving averages cross on a downward track. To classify a "death cross", there are three stages, see below:
- Bullish Collapse: What this means is when the price ranges the top of an upward trend, and the bulls have stopped their run. This phase is triggered by decreased trading volume and price volatility.
- Bearish Crossover: This happens when the interim moving average descends under the long-term moving average, indicating the beginning of a new bearish trend. Since the price of a crypto asset has already been decreasing, the crossover confirms that the downturn is happening.
- New Downtrend: This happens when the long-term moving average develops into a new resistance level as the bearish downtrend endures. Bearish trade volume may begin to hasten as short-sellers place bearish orders, and long-term crypto traders sell their trading positions.
In the crypto world, BTC's death cross earlier in 2018 appeared to have been a critical turning point the crypto market's bullish trend. The crypto market still displays signs of a strong bear market. Like any technical analysis tool or method, the death cross is not guaranteed.
The golden cross is the reverse of a death cross; it is a short-term moving average that crosses directly above a long-term moving average to generate a cross. The crossover is an indication that the crypto asset is probably experiencing a reversal, which means crypto traders will contemplate long trading positions and long-term traders may want to add to their holdings. The golden cross happens when the fifty-day moving average crosses above the two hundred-day moving average. There are three phases to a golden cross. The first phase involves a downtrend eventually bottoming out as selling volume is dwindling. In the second phase, the shorter moving average generates a crossover above the larger moving average to activate a price breakout and validation of trend reversal. The last phase is the ongoing uptrend that leads to higher prices for crypto assets.
The crypto market will always have its unexpected market conditions. However, the Death and Golden Cross indicators are among the most long-term popular trading signs that traders use to trade in the crypto market.
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