What does the golden cross between MTM and the signal line mean? What information does the dead cross reveal?

The golden cross signals a bullish trend when MTM crosses above its signal line, while a dead cross indicates bearish momentum when MTM falls below the signal line in crypto trading.

Jun 11, 2025 at 08:29 pm

The golden cross and the dead cross are technical analysis indicators frequently used by traders within the cryptocurrency market to identify potential bullish and bearish trends. Specifically, in the context of MTM (Momentum) and its signal line, these crosses provide valuable insights into market momentum and potential price movements. Let's delve into what the golden cross between MTM and the signal line means, and what information the dead cross reveals.

Understanding MTM and the Signal Line

MTM, or Momentum, is a technical indicator that measures the rate of change in an asset's price over a specified period. It is calculated as the difference between the current closing price and the closing price a certain number of periods ago. The signal line, often a moving average of the MTM, is used to smooth out the momentum indicator and generate trading signals.

The signal line typically is a 9-day exponential moving average (EMA) of the MTM. When the MTM line crosses above or below the signal line, it generates a golden cross or a dead cross, respectively, which traders use to make buy or sell decisions.

The Golden Cross between MTM and the Signal Line

The golden cross between MTM and the signal line occurs when the MTM line crosses above the signal line. This event is considered a bullish signal, suggesting that the momentum of the cryptocurrency is increasing and that a potential upward price movement may follow.

To identify a golden cross, traders follow these steps:

• Monitor the MTM and signal line: Keep a close eye on the MTM and its corresponding signal line on your chosen trading platform or charting software.
• Identify the crossover: Look for the moment when the MTM line moves from below to above the signal line.
• Confirm the signal: It is often recommended to wait for a few periods to ensure that the crossover is not a false signal. A sustained move above the signal line reinforces the bullish indication.

When a golden cross occurs, it suggests that the cryptocurrency's momentum is shifting from negative to positive, and traders may consider entering long positions or adding to existing positions.

The Dead Cross between MTM and the Signal Line

Conversely, the dead cross between MTM and the signal line occurs when the MTM line crosses below the signal line. This event is considered a bearish signal, indicating that the momentum of the cryptocurrency is decreasing and that a potential downward price movement may follow.

To identify a dead cross, traders follow these steps:

• Monitor the MTM and signal line: Continuously observe the MTM and its corresponding signal line on your trading platform or charting software.
• Identify the crossover: Look for the moment when the MTM line moves from above to below the signal line.
• Confirm the signal: As with the golden cross, it is advisable to wait for a few periods to confirm that the crossover is not a false signal. A sustained move below the signal line reinforces the bearish indication.

When a dead cross occurs, it suggests that the cryptocurrency's momentum is shifting from positive to negative, and traders may consider exiting long positions or entering short positions.

Interpreting the Golden Cross and Dead Cross in the Cryptocurrency Market

In the cryptocurrency market, the golden cross and dead cross between MTM and the signal line can be particularly useful due to the high volatility and rapid price movements of digital assets. These indicators help traders navigate the market more effectively by providing clear signals for potential trend changes.

For instance, when a golden cross occurs in the context of a cryptocurrency like Bitcoin or Ethereum, it may signal the beginning of a bullish trend. Traders might see this as an opportunity to buy the cryptocurrency at a potentially favorable price before a significant upward movement.

On the other hand, a dead cross could indicate the start of a bearish trend. Traders might use this signal to sell their holdings or enter short positions, anticipating a decline in the cryptocurrency's price.

Using Golden and Dead Crosses in Conjunction with Other Indicators

While the golden cross and dead cross are powerful indicators, they are most effective when used in conjunction with other technical analysis tools. Combining these signals with other indicators such as moving averages, RSI (Relative Strength Index), and volume can provide a more comprehensive view of market conditions and help validate the signals provided by the MTM and signal line.

For example, if a golden cross occurs and is accompanied by a rising RSI and increasing trading volume, the bullish signal is reinforced, and traders may have more confidence in the potential for an upward price movement.

Similarly, if a dead cross occurs alongside a declining RSI and decreasing trading volume, the bearish signal is strengthened, and traders may feel more assured in their decision to sell or short the cryptocurrency.

Practical Application of Golden and Dead Crosses

To apply the golden and dead crosses effectively in trading, traders must integrate these signals into a broader trading strategy. Here are some practical steps to consider:

• Set up your charting software: Ensure your trading platform or charting software is configured to display the MTM and its signal line.
• Monitor the market: Regularly check the charts for potential golden and dead crosses, keeping in mind the volatility of the cryptocurrency market.
• Combine with other indicators: Use other technical indicators to validate the signals provided by the MTM and signal line.
• Develop a trading plan: Based on the signals and additional indicators, create a trading plan that includes entry and exit points, stop-loss levels, and position sizing.
• Execute trades: When a golden or dead cross occurs and is confirmed by other indicators, execute your trades according to your trading plan.

Frequently Asked Questions

Q1: Can the golden and dead crosses be used for all cryptocurrencies?

A1: Yes, the golden and dead crosses can be applied to any cryptocurrency that has sufficient trading data to calculate the MTM and signal line. However, the effectiveness of these indicators may vary depending on the specific cryptocurrency's market dynamics and liquidity.

Q2: How long should traders wait to confirm a golden or dead cross?

A2: The confirmation period can vary based on the trader's strategy and risk tolerance. Generally, waiting for 1-3 periods after the initial crossover can help ensure that the signal is not a false one. Some traders may prefer to wait longer for added confirmation.

Q3: Can the golden and dead crosses be used for short-term or long-term trading?

A3: The golden and dead crosses can be used for both short-term and long-term trading, depending on the time frame of the MTM and signal line. For short-term trading, shorter periods such as 12-day MTM and 9-day signal line can be used. For long-term trading, longer periods such as 25-day MTM and 9-day signal line may be more appropriate.

Q4: Are there any risks associated with relying solely on golden and dead crosses?

A4: Yes, relying solely on golden and dead crosses can be risky due to the potential for false signals and the inherent volatility of the cryptocurrency market. It is crucial to use these indicators in conjunction with other technical analysis tools and to have a well-defined trading plan to manage risk effectively.