Final answer:
When the short-term moving average moves above the long-term moving average, it is a bullish signal known as a 'golden cross', indicating a possible upward trend in the stock's price. Traders often use this crossover as a buy signal.
Step-by-step explanation:
When the short-term moving average (e.g., 5-day) moves above the long-term moving average (e.g., 10-day), it is considered a bullish signal in trading. This is referred to as a 'golden cross' and indicates a possible upward trend in the stock's price. Traders often use this crossover as a buy signal.
For example, let's say the 5-day moving average of a stock's price is $50 and the 10-day moving average is $45. When the 5-day moving average crosses above the 10-day moving average, it suggests that the stock's price is likely to continue increasing.
However, it's important to consider other factors as well, such as volume and market conditions, before making trading decisions solely based on moving average crossovers.