Golden Cross Trading Strategy (Backtest Analysis)

Golden Cross Trading Strategy is famous and a cited phenomenon in the media. In this article, we look at the performance of the Golden Cross in the S&P 500.

A Golden Cross involves two moving averages – one short and one long. We use the 50 and 200-day moving averages.

A Golden Cross happens when the short moving average crosses above the long moving average. As a trading signal, it works reasonably well. It keeps you invested in bullish markets and keeps you out of trouble when we get a bear market. You will also find a Golden Cross Trading Strategy Glossary if you want to learn more about this indicator.

Let’s start by explaining in more detail what the Golden Cross in trading is:

What is the Golden Cross Trading Strategy?

A Golden Cross involves two moving averages – one short and one long. When the short-term moving average crosses above the long-term moving average, we have a Golden Cross.

We like to use the 50-day and the 200-day averages. Thus, when the 50-day moving average breaks above the 200-day moving average a Golden Cross is formed.

For some reason, this breakout attracts a lot of media attention and a lot of speculation about a potential bull market. Is this for a good reason? You’ll find out after our backtests further below.

Why should the Golden Cross Trading Strategy work?

The stock market tends to be in a long-term uptrend due to inflation and productivity gains, and the Golden Cross Trading Strategy aims to exploit this upward bias while reducing losses in bear ma