How the Golden Cross (50/200 SMA) strategy works
The golden cross happens when a short-term moving average — classically the 50-day simple moving average — crosses above a long-term one, usually the 200-day SMA. The opposite signal, the 50 crossing below the 200, is called the death cross.
It is a slow, trend-following system: it trades rarely, stays in big bull markets for months and avoids most of the deep bear markets. The price is late entries and exits, and many small losses when the market moves sideways.
Rules
- Buy when SMA 50 crosses above SMA 200 (daily chart).
- Sell when SMA 50 crosses below SMA 200.
Ideas to test
Try EMA instead of SMA for faster signals, add a stop-loss, or test it on weekly bars. Compare the result with simply buying and holding — the builder shows both.
Backtests use historical data and simplified fills. Past performance does not guarantee future results. Education only — not investment advice.