Trading
The fifty day moving average crossing below the two hundred day, read as confirmation of a longer downtrend.
What you are looking at
The same two averages, with the shorter one falling down through the longer one.
How traders act on it
Like its counterpart it confirms rather than predicts. It is most often used to justify reducing risk rather than to open a short.
When it fails
It has marked local bottoms about as often as tops. A death cross arriving after a market has already fallen a long way is frequently the late signal it looks like.
Failure is normal and it is not a problem, provided you decided your invalidation level before entering and sized the position so that being wrong is survivable. See risk management.
Context that changes the odds
| Factor | Improves the setup | Weakens it |
|---|---|---|
| Higher timeframe trend | Pattern agrees with the daily or weekly direction | Pattern fights the larger trend |
| Volume | Expands on the breakout | Breakout happens on thin volume |
| Duration | Formed over many candles | Formed over three or four candles, which is mostly noise |
| Level confluence | Trigger sits at a well tested level | Trigger sits in empty space with no history |
| Market conditions | Trending, orderly market | Choppy range, where nearly every pattern fails |
Other patterns
Common questions
Does a death cross mean I should sell?
Why does everyone talk about it then?
Where to go next
Practice spotting these
We go through live charts together and separate the real setups from the shapes your brain wants to see. That second skill is the harder one.