Golden cross

Two moving averages of the same price series, one taken over a short window and one over a long one. The shorter average reacts faster, so it turns first; when it rises through the longer one the crossing is called a golden cross, and the opposite crossing is called a death cross. The most quoted pair is the fifty period average against the two hundred period average on a daily chart, but the convention is not fixed and other windows are in common use.

What the crossing states is narrower than it sounds. A moving average is an average of prices that have already printed, so a crossing is a statement about the recent past: the short window's average has risen above the long window's. Both averages lag by construction, so the crossing is recorded well after the low that produced it, and the longer the windows the later it arrives.

Practitioners disagree sharply about its usefulness, and the disagreement is real rather than rhetorical. Supporters treat it as a coarse filter that keeps a reader on the same side as a long trend and out of the noise between trends. Critics point out that it is late by design and that in a range bound market the two averages cross back and forth repeatedly, a behaviour called whipsaw. Published back tests reach different conclusions depending on the market, the windows and the period tested, which is why the argument has not settled.

Three definitional details are worth holding. The crossing is conventionally read on closing prices, so an average that crosses during a session and closes back on the other side has not produced one. It depends on the type of average: a simple average and an exponential average of the same window cross on different days. And the term names a geometric event on a chart, not a forecast of anything.