Moving average (MA) is the most basic and practical technical analysis tool, with the core logic of 'using average price to judge the trend.' Different moving average strategies are suitable for different market conditions, from simple to complex, allowing beginners to gradually master them.
1. Single moving average strategy (recommended for beginners, simple and direct)
Core logic
Using a single moving average as the only criterion for judgment, determine the direction of 'trend trading' through the relationship between price and the moving average, which essentially means 'go with the trend.'
Common parameters (most effective in practice)
- Short-term: MA20 (20-day moving average, suitable for 1-4 hour short trades)
- Medium-term: MA60 (60-day moving average, suitable for daily band trading)
- Long-term: MA200 (200-day moving average, suitable for weekly long-term trends)
Trading Rules (taking MA20 as an example, short-term)
1. Buy Signal: The price breaks above MA20 from below, and the close is above MA20, this is regarded as 'trend turning bullish', can enter long;
2. Sell Signal: The price breaks down from above MA20, and the close is below MA20, this is regarded as 'trend turning bearish', can enter short;
3. Stop Loss Setting: Bullish stop loss is 1-2 points below MA20, bearish stop loss is 1-2 points above MA20 (to avoid false breakouts).
Advantages and Disadvantages
- ✅ Advantages: Simple rules, easy to execute, suitable for beginners to establish 'trend thinking';
- ❌ Disadvantages: Signals frequently fail in volatile markets (prices oscillate across the moving averages), easy to 'chase highs and cut lows'.
2. Double Moving Average Strategy (Advanced choice, balancing sensitivity and stability)
Core Logic
Using two moving averages of different periods to filter oscillation signals and accurately capture trend reversals, is one of the most commonly used strategies in practice.
Common parameter combinations (must memorize)
- Short-term Combination: MA20 (Short-term) + MA60 (Long-term) (suitable for 1-4 hour cycles)
- Band Combination: MA60 (Short-term) + MA120 (Long-term) (suitable for daily cycle)
Trading Rules (taking MA20+MA60 as an example)
1. Buy Signal (Golden Cross): The short-term moving average (MA20) crosses above the long-term moving average (MA60), and the price is above both moving averages, this is regarded as the 'bullish trend initiation', enter long;
2. Sell Signal (Death Cross): The short-term moving average (MA20) crosses below the long-term moving average (MA60), and the price is below both moving averages, this is regarded as the 'bearish trend initiation', enter short;
3. Auxiliary confirmation: Volume increases during the golden cross, volume increases during the death cross, making the signals more reliable (avoiding false golden/death crosses).
Advantages and Disadvantages
- ✅ Advantages: Strong oscillation filtering ability, signal accuracy is higher than single moving averages, balancing short-term profit and risk control;
- ❌ Disadvantages: Signals have 'lagging' nature when trends reverse (for example, a price has risen for a while, the golden cross only appears then), may miss the best entry point.
3. Triple Moving Average Strategy (Advanced for experts, accurately capturing trends and pullbacks)
Core Logic
Using three moving averages to build a complete trading system of 'trend + pullback', through the arrangement relationship of short-term, medium-term, and long-term moving averages, assess trend strength and pullback timing, suitable for traders with some experience.
Common parameter combinations (practical bestsellers)
- Classic combination: MA5 (Ultra Short-term) + MA20 (Short-term) + MA60 (Long-term) (suitable for 1-hour short-term trading)
- Band Combination: MA20 (Short-term) + MA60 (Medium-term) + MA120 (Long-term) (suitable for daily band trading)
Trading Rules (taking MA5+MA20+MA60 as an example)
1. Trend Judgement (determine direction first, then find opportunities)
- Bullish Trend: Three moving averages are in a 'bullish arrangement' (MA5 above MA20, MA20 above MA60), and all are sloping upwards;
- Bearish Trend: Three moving averages are in a 'bearish arrangement' (MA5 below MA20, MA20 below MA60), and all are sloping downwards;
- Volatile Trend: Three moving averages are entangled together, with no clear arrangement direction, directly stay in cash and wait.
2. Entry Signal (following the trend + pullback, precise entry)
- Bullish Entry: In a bullish arrangement, the price pulls back to MA20 (without breaking), and MA5 crosses above MA20 (second golden cross), enter long;
- Bearish Entry: In a bearish arrangement, the price rebounds to MA20 (without breaking), and MA5 crosses below MA20 (second death cross), enter short.
3. Stop Loss and Take Profit (dynamic adjustment, lock in profits)
- Stop Loss: Bullish stop loss is below MA60, bearish stop loss is above MA60;
- Take Profit: Bullish take profit is near previous highs, or when MA5 crosses below MA20, liquidate; bearish take profit is near previous lows, or when MA5 crosses above MA20, liquidate.
Advantages and Disadvantages
- ✅ Advantages: Captures trend markets while precisely grasping pullback entry points, offers larger profit potential, more flexible risk control;
- ❌ Disadvantages: Rules are complex, requires proficient understanding of moving average arrangement logic, beginners are prone to losses due to misjudgment.
Key Reminder: Core taboos of moving average strategies
1. Not suitable for volatile markets: whether single/double/triple moving averages, signals frequently fail during sideways movements, at this time, one should stay in cash and wait, avoiding forced trading;
2. Use with other indicators: Moving average strategies are best combined with indicators like volume, MACD to confirm signals, for example, golden cross + increased volume, the win rate will significantly increase;
3. Adapting the cycle is very important: use shorter cycle moving averages (MA5/MA20) for short-term, and larger cycle moving averages (MA60/MA120) for long-term, do not use daily moving averages for 1-hour short-term trading.
Content for reference only, does not constitute investment advice.
