Complete Guide to MA Line Settings: Master the Core Uses of Moving Averages in 5 Minutes

Moving Average (MA) is a technical indicator that every trader must master. However, many people spend a lot of time learning it but still don’t know how to use it effectively. Today, we will analyze this “universal indicator” from a practical perspective in depth.

1. What exactly is the MA line?

Simply put: The moving average line is the average of the stock price over the past N days, connected by a line.

The specific formula is: N-day Moving Average = Sum of closing prices over N days / N

For example, the 5-day moving average is calculated by adding up the closing prices of the past 5 days and dividing by 5. As time progresses, this window slides forward continuously, generating a new average each day. These averages are then connected to form the moving average line you see.

It helps you identify short-term, medium-term, and long-term price trends, judge bullish or bearish movements, and find relatively reliable buy and sell points. But remember: The MA is just an auxiliary tool; it should not be overly relied upon and must be used in conjunction with other indicators.

2. What types of MA lines are there?

Based on different calculation methods, moving averages are divided into three main types:

Simple Moving Average (SMA)

• The most basic arithmetic mean, giving equal weight to all periods
• Easy to calculate but reacts slowly to recent price changes

Weighted Moving Average (WMA)

• Assigns higher weights to recent prices
• More sensitive than SMA, better reflecting current market conditions

Exponential Moving Average (EMA)

• Calculated with exponential weighting, giving the most weight to the latest prices
• Most sensitive to price fluctuations, favorite among short-term traders
• Can quickly capture signals of trend reversals

In simple terms: EMA > WMA > SMA, the earlier the type, the more sensitive; the later, the more stable.

Most trading software automatically calculates these, so you just need to know how to use them—no need to manually derive formulas.

3. How to choose MA settings?

Common time periods

Depending on your trading cycle, the main ones are:

Short-term MA: 5-day (weekly), 10-day

• The 5-day MA is a crucial reference for very short-term trading
• If the 5-day MA rises rapidly and crosses above the 20-day and 60-day MA, it indicates a clear bullish trend
• Essential indicator for short-term traders

Medium-term MA: 20-day (monthly), 60-day (quarterly)

• The 20-day MA reflects the average price over about a month
• Suitable for both short- and medium-term investments
• The 60-day MA is an important reference for medium-term trading

Long-term MA: 240-day (annual), 200-day

• Used to judge major trend directions
• When short-term MA drops below quarterly and annual MA, it indicates a bearish trend
• A reliable indicator for long-term investors

How to pick the most suitable settings for yourself?

Here’s a tip: There is no absolute standard cycle; the key is to find the one that best matches your trading system.

Some use 14 days (roughly two weeks), others 182 days (about half a year), each with their reasons. We need to test in real trading to find the combination that suits us best.

A crucial understanding: Short-term MA is highly sensitive but noisy; long-term MA is stable but reacts slowly. The smartest approach is to combine short, medium, and long-term MAs for mutual confirmation.

4. How to apply MA lines in practice?

1. Tracking trend direction

Bullish alignment: When short-term MAs (5-day, 10-day) are above medium-term MAs (20-day, 60-day), indicating rising prices. This suggests a bullish outlook; consider going long.

Bearish alignment: Conversely, when short-term MAs are below long-term MAs, indicating a downward trend. Consider shorting or staying on the sidelines.

Consolidation zone: When price action oscillates between short-term and long-term MAs, indicating market indecision. Be cautious with positions and wait for a clear direction.

2. Using MA crossovers to find entry points

This is one of the most practical uses of MA:

Golden Cross

• Short-term MA crosses above long-term MA from below
• Usually signals the start of an upward trend
• Considered a reliable buy signal

Death Cross

• Short-term MA crosses below long-term MA from above
• Indicates a potential downward trend
• Considered a reliable sell signal

Example: Set short, medium, and long MAs on EUR/USD daily chart. When the short-term MA crosses upward through the medium and long MAs, the price enters an uptrend, and you can consider going long. The opposite applies for a downtrend.

3. Combining with oscillators

An advanced technique: MA lines have a lagging nature. The market may have already moved significantly before the MA reacts.

Solution: Use leading indicators like RSI, MACD.

Practical approach: When RSI or other indicators show divergence (e.g., price makes a new high but RSI does not), and MA lines start flattening or turning sideways, be alert. You can lock in profits or prepare for a reversal.

4. Using MA lines as stop-loss references

In Turtle Trading rules, MA lines are often used to set stop-loss levels:

Long position stop-loss: When price falls below the 10-day MA and also drops below the lowest point of the past 10 days, exit.

Short position stop-loss: When price rises above the 10-day MA and also exceeds the highest point of the past 10 days, exit.

This method is advantageous because it is completely objective, requiring no subjective judgment—letting the market speak for itself, greatly reducing human bias.

5. How to set MA lines?

Setting MA lines in most trading software is straightforward:

Step 1: Open your trading platform; it usually defaults to showing a few basic MAs (like 5-day, 10-day, 15-day).

Step 2: Find the chart settings (often at the top right), click to access.

Step 3: Choose the MA type (SMA, WMA, EMA) and time period according to your trading style. You can add or remove MA lines or modify their periods freely.

Tip: Beginners can start with simple settings like 5-day, 20-day, 60-day MAs, and adjust as they become more experienced.

6. Limitations of MA lines (must be recognized)

Even the best indicators have their limitations:

1. Lagging: Since MA is based on past prices, it inherently reacts slower than real-time market movements. Longer periods mean more lag.

2. No predictive power: Past prices do not guarantee future trends. MA reflects trend but cannot predict with certainty.

3. False signals in consolidation: During sideways or choppy markets, MA can generate many false signals, leading to whipsaws.

4. Relying solely on MA is risky: Using only MA for trading can be dangerous.

7. Conclusion

Moving averages are the most fundamental and practical technical indicators. Mastering their settings and applications can help filter out noise and capture main trends.

But remember these three points:

• No perfect indicator exists; only an evolving trading system.
• Combining multiple indicators improves success rates.
• Optimal MA settings require continuous adjustment through practice.

Start testing with real or simulated trading to find the MA combination that works best for you.