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Forex EMA 200-50 Golden Cross and Death Cross Trading Strategy


Two very famous technical patterns that fall under the category of swing trading strategies include the “golden cross” and “death cross”.

Each of these strategies depends on the trends of moving averages, specifically the 50-day and 200-day moving averages (taken from closing prices).

These technical patterns rely on more medium-term charts, primarily 4-hour to 1-day charts.

Periodicity is especially important as shorter-term charts are not relevant and useful in assessing these patterns.

What is the difference between a Golden Cross and a Death Cross Pattern?

The golden cross and the death cross are exact opposites.

The golden cross indicates a long-term bull market going forward, and the death cross signals a long-term bear market.

Both refer to the solid confirmation of a long-term trend by the occurrence of a short-term moving average crossing over a major long-term moving average.

 

Golden Cross

The golden cross is a technical pattern where the shorter-term 50-day moving average crosses a longer-term 200-day moving average to the upside.

Trading NOTES

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This is a BULLISH pattern, signifying a situation where upside momentum is forecast to increase, marked in conjunction with higher than average volumes.

The 200-day moving average also becomes a support level for prices.

 

Golden Cross

The death cross, although dark in name, is merely the opposite of a golden cross, with the shorter-term moving average crossing the longer-term moving average to the downside.

This is typically indicative of a possible BEARISH market on the horizon and is usually confirmed by higher than average trading volumes.

After crossing, the longer-term moving average serves as a resistance level for prices and is a great area to short the instrument on momentum pullbacks.

Golden Cross and Death Cross Trading Strategy

The rule for this “Golden Cross and Death Cross” Trading system is very simples are based on the price action.


TRADE ONLY IN THE TREND.

  • Best Time Frames: H4, Daily, and higher
  • Most Recommended Currency Pairs: GBPUSD, EURUSD, USDJPY, and all Major pairs
MetaTrader Trading Indicators
  • Exponential moving average 200 EMA Low (Red line);
  • Exponential moving average 50 EMA high (Yellow line);
  • Trend LINE
  • BBand Stop Alert
  • RSIDiv
BUY Rules

  • Golden Cross (the shorter-term 50-day moving average crosses a longer-term 200-day moving average to the upside)
  • Price must make a high and then retrace back to make a low but stay above the 50 or 200 EMA
  • Place a buy order at the previous high with stops at the most visible low
  • Trend LINE blue color
  • BBand Stop Alert blue color
  • RSIDiv blue color
  • Price must be trading at or above the 50 EMA
SELL Rules

  • Death Cross (the shorter-term 50-day moving average crosses a longer-term 200-day moving average to the downside)
  • Price must make a low and then retrace back to make a high, contained within the 200 and 50 EMA
  • Place a sell order at the previous low with stops above the low at the most visible intermediary high
  • Trend LINE blue color
  • BBand Stop Alert blue color
  • RSIDiv blue color
  • Price must be trading at or below the 50 EMA
Trading NOTES

The advantage of using this trading strategy can be summarized into the following:

  • Using the two moving averages and entering after the trend is established offers a low-risk trading strategy.
  • The trading strategy is very objective but requires a bit of practice to identify the trade setups.

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