Archive: May 2023

When we talk about the Golden Cross, we aren’t talking about an epic like the Lord of the Rings or The Game of Thrones in which people are fighting over some cross made of gold. We are from the trading community and we are interested in making money from price volatility. In that sense, the Golden Cross is a technical chart pattern that indicates a bull market. It is considered by traders to be a signal to go long. Before we go deeper into the Golden Cross, it is important to first understand the indicator that allows us to spot the Golden Cross. This indicator is called the moving average.

The Moving Average

A moving average is exactly what the name says, it is an average that moves with time. The moving average takes into account the price over a fixed period in the past and gives an average. The lookback period stays constant while the average “moves” as we go ahead in time. Sounds confusing? Let’s discuss using an example. 

Say you are trading Bitcoin. The price of Bitcoin moves all over the place. In fact, the price of most cryptocurrencies moves quite a bit as the asset class is considered to be very volatile. Let us assume that it is 1st January 2023. A 50-day moving average will look at Bitcoin prices over 50 days prior to 1st January 2023 and calculate an average of those prices. This average will be the moving average on 1st January 2023. Then, on 2nd January 2023, the average changes because now the calculation of the average goes back 50 days from 2nd January 2023 and not the 1st. So, the 50-day average on 2nd January will be slightly different from what was calculated on the 1st. This “moving” average is plotted over time and looks something like the image shown below.

(50-day simple moving average  Source: cerusmarkets.com)

What Happens If We Change The Lookback Period?

The example above discusses the 50-day moving average. But, what if the 50-day lookback period was reduced to, say, 20 days? Or what if the lookback period was increased to 200 days? The 20-day moving average will calculate the price average over the previous 20 days while a 200-day moving average will calculate the price average over the previous 200 days.

(20, 50, and 200-day moving averages   Source:cerusmarkets.com)

The image above shows the 20-day moving average in yellow, the 50-day moving average in blue, and the 200-day moving average in dark red. As you can tell, the shortest moving average (20-MA) appears to be the most sensitive while the longest moving average (200-MA) appears to be the least sensitive. In other words, the longer moving average tends to “filter out” the noise while the shorter moving average tends to highlight smaller price movements.

The most commonly used moving average lookback periods are 50 days and 200 days. Why is that the case? There is no clear-cut answer, but in the stock markets, there are 200 trading days in a year. So, the 200-day moving average calculates the average price over the past trading year. Similarly, a 50-day moving average covers 2 months. A 20-day moving average covers roughly 1 month of trading. The crypto markets are not shut on the weekends, so the lookback periods may not make sense. However, most of the trading community uses the 50 and 200-day averages. So, it makes sense to use them.

The Golden Cross

The Golden Cross pattern occurs when the 50-day moving average crosses and goes above the 200-day moving average. It is considered to be a bullish signal and traders may take long positions when a Golden Cross occurs. The believers of the Golden Cross would argue that such a crossover means that an uptrend is about to begin. The short-term moving average (50-day in this case) is the first one to react to an uptrend. Gradually, the longer-term (200-day) moving average also catches up.

It must be clarified that the Golden Cross alone (or any indicator) cannot guarantee profits. It is simply another tool in the toolkit of a trader. So, one should not view the Golden Cross in isolation. Rather, it has to be used in combination with other indicators and price action analysis. First, one must identify which stage of the Golden Cross is currently playing out.

The Golden Cross pattern plays out over three stages. In stage one, the price fall tends to gradually stop as selling pressure eases. A bottoming out happens in this stage before a reversal occurs. The second stage is when the reversal transitions into a breakout. The shorter moving average crosses over the longer average and the Golden Cross pattern appears. The third stage is when both the 50-day and 200-day moving averages act as support as the price makes higher highs and higher lows.

A trader using the Golden Cross will have to perform analysis to identify the moderating selling pressure, the bottoming out, and the reversal. After validating those trends, the Golden Cross acts as a confirmation and gives the trader conviction to go long.

(Golden Cross in May 2020 for BTC  Source:cerusmarkets.com)

Sometime in May 2020, after the pandemic outbreak caused mayhem in all the markets around the world, there was a period of consolidation before a massive bull run. The Golden Cross occurred in BTC in May 2020 and the price almost tripled from that point.

More recently, in November 2022, Litecoin saw a Golden Cross after which the price rose significantly.

(LTC Golden Cross in Nov 2022  Source:cerusmarkets.com)

Using The Golden Cross Pattern In Other Ways

The Golden Cross pattern can also be used in ways other than simply going long. Those who are on the short side can use the pattern to square off their positions as the price may be about to move against them.

Traders can also use different moving averages than the ones we have discussed. For example, since the cryptocurrency markets operate on all days of the week, one can use a 300-day moving average instead of a 200-day moving average. Similarly, a 30-day moving average can be used in place of a 20-day moving average. However, we recommend that you backtest and paper-trade new lookback periods before deploying it live. Traders can also use a 20-day and a 50-day moving average for the short-term and long-term averages. There is no requirement to use a 200-day moving average.

The Golden Cross pattern can be used on daily, monthly, weekly, and even hourly charts. You can trade it at any timeframe.

The Golden Cross pattern signals a bull run much after the uptrend has initiated. Traders who are eager to go long earlier may enter with a small position when the price crosses the 200-day moving average and then increase the position size when the Golden Cross validates their bullish bet.

We hope you found this article on Golden Cross useful. If you are ready to apply this knowledge in trading cryptocurrencies, then go ahead and open an account with Cerus Markets. It offers cryptocurrency CFDs and currently has a 100% welcome bonus offer for new users.

Crypto traders might be looking for something physical to trade. They started looking at commodities. 

Farmers are starting to trade digital assets because they heard that they can grow rich digitally.

Some commodity traders were looking to trade something that is even more volatile than soybeans – and they started looking at crypto.

Woah! Everyone appears to think that the grass is greener on the other side. The commodity trader thinks it is easier to mine Bitcoin and the crypto trader thinks it is easier to mine metals out of the earth. 

Meanwhile, we think it’s all about making your beans count, whether in the physical world or the digital world.

It’s always the poor beans that get caught in the crossfire! So, we have decided that we should discuss how we can combine commodities and crypto.

Yes, you can trade crypto vs commodities right here on Cerus Markets. And no, there is no mining involved. Instead, we will use CFDs to take positions in a commodity and a cryptocurrency simultaneously.

Does that sound interesting to you? Then read on.

Why Are Commodities Important?

We consume commodities every single day. Starting with the coffee that you drink when you wake up, the cereal or toast that you eat before heading out, the petrol that you use to drive your car, and the gold/silver that you show off in your bling at a party later in the evening, we use all sorts of commodities.

Some of the most popular commodities in the trading world are precious metals and oil. Gold is by far the most traded precious metal. It is closely followed by traders around the world.

Some of the largest consumers of gold are the people of India and China, two of the most populous countries on Earth. Central banks have also been on a gold-buying spree due to the latest developments in the currency markets.

After gold, silver is the second-most closely watched precious metal. It is a lower-priced precious metal when compared to gold. Silver is also viewed by some as a hedge against inflation.

Silver has quite a few uses in industrial applications as well. So, the demand for silver can sometimes be used to gauge the level of economic activity.

Oil is perhaps the most important commodity to follow. The global economy is powered by oil and its price impacts every country’s balance of trade, currency, and inflation.

Oil also impacts political choices as it is an important and regularly consumed resource. Even oil-exporting countries are impacted by the oil market because it can lead to power struggles, corruption, and significant revenue generation.

What Does It Mean To Trade Crypto vs Commodities?

Traders and investors are familiar with Bitcoin, Ethereum, Litecoin, Dogecoin, and most of the major cryptocurrencies. Traders who like volatility tend to like cryptocurrencies because of the relatively high volatility that they offer.

Seasoned traders and investors are also familiar with most of the major commodities. Experienced traders tend to regularly trade commodities or at least keep track of their price action.

However, wouldn’t it be interesting if traders could trade one cryptocurrency vs a commodity or take a simultaneous position in one cryptocurrency and one commodity? That is exactly what a Cerus Markets crypto vs commodity CFD can do.

Trading one asset vs another is a lot like trading in the forex market. For example, when you trade the Swiss Franc, you would usually do so against another currency. So, if you trade CHF/JPY, you are trading the Swiss Franc vs the Japanese Yen. 

A CHF/JPY value of 100 implies that you need 100 Japanese Yen to purchase 1 Swiss Franc. The first currency, the CHF, is the base currency. The second currency, the JPY, is the quote currency.

In the case of a Cerus Markets CFD, ETH/XAU would mean trading Ethereum vs Gold. The value of ETH/XAU would indicate the troy ounces of gold needed to buy one Ethereum coin.

So, when someone says that they are trading crypto vs commodities, they would usually mean having crypto as the base asset and a commodity as the quote asset.

Interpreting Cryptos vs Commodities Trades

In crypto vs commodity CFD, if you are long ETH/XAU, then you either believe that Ethereum will rise faster than silver or silver will fall faster than Ethereum.

It could also mean that Ethereum rises but Silver stays flat or Ethereum stays flat but silver falls.

Similarly, if you are short ETH/XAU, then you either believe that Ethereum will fall faster than silver or silver will rise faster than Ethereum.

It could also mean that Ethereum falls while silver stays flat or silver rises while Ethereum stays flat.

The idea is that the ratio of ETH/XAU falls. In the case of a long trade, the ratio of ETH/XAU rises.

So trading one asset vs another is like trading a ratio. You are long one asset and simultaneously short another. Or you are long/short one asset while believing that the other asset will remain flat.

Possible Strategies To Trade Cryptos vs Commodities

At this point, you must be wondering if you now have a good basic understanding of commodities and what it means to trade them vs cryptos (or trade cryptos vs commodities).

Now, you must be asking yourself how to trade commodities vs crypto. How to trade this CFD that Cerus Markets is talking about?

You could start by looking at the price action of gold, silver, or oil. You would then look at the price action of Bitcoin, Ethereum, or Litecoin.

Then, after forming an opinion as to where these assets are headed, you could create a ratio and go long or short. This would be a discretionary trade.

System traders could try and use indicators. Moving averages work well to ride trends while moving average crossovers can be used to generate entry and exit signals.

One can also use stochastics, RSI, Bollinger Bands, Fibonacci, and multiple other indicators that Cerus Markets offers on its platform.

Trading crypto vs commodity CFD is just like trading any other asset. However, CFD is a leveraged product and you MUST follow proper risk management to protect your trading capital.

Final Words

We hope that you found this primer on trading crypto vs commodities useful. If you are feeling confident about trading such a CFD and want to get started, then go ahead and open a new account with Cerus Markets. Our 100% welcome bonus offer will seal the deal for you.

Good luck trading!

You may have heard the word Fibonacci in your school or college math class. Fibonacci was the name of a famous Italian mathematician who introduced the Western world with an interesting sequence of numbers called the Fibonacci sequence. The sequence is such that every number in the sequence is the sum of the previous two numbers. Additionally, the ratio between any two consecutive numbers in the sequence is the same. 

The Fibonacci sequence is commonly found in nature, in the way plants grow, in the way honey bee families evolve, and even in the way cloud spirals are formed in hurricanes. Speaking of the connection between the financial markets and nature, famous American hedge fund manager Victor Niederhoffer believed that events in nature have a bearing on market patterns. Similarly, many traders also believe that the Fibonacci sequence which seems to act as a balance in nature also has significance in the market. Traders have figured out a way to use the Fibonacci ratio as a guide toward spotting important price levels.

In this article, we will take a detailed look at what the Fibonacci trading indicator is and how you can use it to identify key points on the cryptocurrency price charts to execute high-probability trades.

What exactly is the Fibonacci sequence?

The following is what the Fibonacci sequence looks like: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610…..

This sequence continues further. We have just listed the initial part for demonstration. If you notice, the third number in the sequence (1) is the sum of the first two (0 and 1). The fourth number (2) is the sum of the second and third numbers (1 and 2). Sounds interesting right? As a trader, we want you to focus on another aspect of this sequence, which is the ratio. Dividing the first number by the second gives you 0 (0 divided by 1). Dividing the next two numbers in the sequence (1 and 1) gives you 1. Similarly, dividing 1 by 2 gives you 0.5.

Now, ignore the first three numbers in the sequence and start with the fourth (2). If we divide it by the next number (3), then the ratio is roughly 0.6. This holds true for the rest of the sequence. Dividing one number by the very next one in the sequence will roughly work out to 0.618.

But wait, the Fibonacci sequence gets even more interesting. Instead of consecutive numbers, if you divide any two numbers that are two places apart, you get 0.38. So, for example, dividing the fifth number in the sequence (3) by the seventh one (8) roughly results in a ratio of 0.38. Take it a step further and divide any two numbers that are three places apart. You will consistently get a ratio of roughly 0.236.

These ratios – 0, 1, 0.5, 0.618, 0.38, and 0.23 are Fibonacci ratios. We will use them in the Fibonacci indicator and therefore, it is important to keep them in mind.

Finding support and resistance using Fibonacci ratios

As a trader, you are constantly trying to find important price levels. You want to go long when the price reverses from support or go short when the price reverses after facing resistance. The Fibonacci ratios (0.5, 0.618, 0.38, etc) can help you find those levels with a reasonable level of accuracy.

For example, if the price has been in an uptrend and then topped out, it will likely pull back to 61.8% of the total uptrend before perhaps finding support. By total uptrend, we mean the distance from where the current uptrend began (at the previous bottom) to the point where the top of the current uptrend occurred. If the price breaks the 61.8% level, then it could find support at the 50% level. If that breaks too, then the next possible support could be 38%. The Fibonacci indicator will show all the various ratio levels. You can simply use the indicator to superimpose these levels on the price chart.

Source: cerusmarkets.com

After a downtrend, if the price finds a bottom after a strong down move, then it is likely to retrace back up. It may likely reverse to 61.8% of the total downtrend before finding resistance. By total downtrend, we mean the distance from where the current downtrend began (at the previous top) to the point where the bottom of the current downtrend occurred. If the price breaks through the 61.8% retracement level, then it could test the 50% level or the 38% level.

Source: cerusmarkets.com

Estimating Possible Extension Levels

If you flip (inverse) the Fibonacci ratios, then you get some important numbers. The inverse of 0.618 is 1.618, the inverse of 0.5 is 2, and so on. You can use these numbers to estimate how far the price is likely to travel for you to exit your trade. The principle of measuring distances is the same as with retracement levels.

For example, if the price is in an uptrend and you identified support to enter a trade (buy on dips), then you can estimate another pullback or reversal at  161.8% of the original uptrend. By original uptrend, we mean the point from where the uptrend began (previous bottom) to where it topped out before the pullback when you entered the trade. The same concept can be applied to a down move to find out how far the price is likely to fall before taking a breather or reversing altogether. In the case of a downtrend, you will look for 161.8% of the original downtrend. By original downtrend, we mean the point from where the downtrend first began (previous top) to the point where it bottomed out temporarily before continuing the downward journey.

To summarize, if Fibonacci retracement levels were used to identify entry points, then Fibonacci extension levels can be used to identify targets and exit points.

Cerus Markets offers the Fibonacci indicator as part of a complete suite of technical trading indicators. Its platform is designed to help users analyze price trends seamlessly using multiple indicators. If you would like to start trading cryptocurrencies and CFDs using such indicators, open a trading account now. Take advantage of the ongoing 100% welcome bonus offer for new sign-ups.