Golden cross and death cross

A golden cross occurs when a moving average built from a shorter period crosses above a moving average built from a longer period, on a stock or index chart, most commonly the 50-day moving average crossing above the 200-day moving average. A death cross is the opposite event, when the shorter average crosses below the longer one. Both are treated as signals about a potential shift in the trend over the longer run.

A golden cross is read as a bullish signal, since it means recent prices, reflected in the faster moving average, have climbed enough to overtake the slower average built from a longer, more established stretch of price history, suggesting momentum has turned upward on a sustained basis rather than just a short-term bounce. A death cross carries the opposite reading, signaling that recent price weakness has become significant enough to drag the shorter average below the longer one, often interpreted as confirmation that a downtrend has taken hold.

Because both signals are based on moving averages, which smooth out price with a delay inherent to them, a golden cross or death cross confirms a trend change only after it has already been underway for some time rather than catching it at the very start. This lag means the signal works best as confirmation of a broader trend shift rather than as an early entry or exit trigger, and both patterns can occasionally produce false signals in a choppy market where the two averages cross back and forth repeatedly without a lasting trend developing.