Recently, new traders have been asking about how to use moving averages. So I’ve organized my trading insights to share with everyone. Honestly, moving averages seem simple, but very few people truly master how to use them effectively.

First, the conclusion: the reason why smart money and legendary traders have been using moving averages long-term is because they follow the principle of simplicity. You don’t need a bunch of complicated indicators; just understanding the relationship between candlesticks and moving averages allows you to build your own MA parameter system. I personally use 120 and 200 on the daily chart, while smaller timeframes often use 144 or 169. There’s no absolute answer—what matters most is adjusting based on your review results.

The core logic of moving averages is straightforward: they calculate the average price over a certain period and plot it on the chart. For example, if you set a 169 MA on a 4-hour chart, the system automatically calculates the average closing price of the most recent 169 four-hour candles and displays it as a curve. This line updates in real-time, reflecting the latest price trend.

How to judge trading signals? It’s simple. When the candlestick crosses above the MA, it’s a bullish signal; crossing below indicates a bearish trend; sideways movement means consolidation. When prices stay above the MA, it indicates an uptrend; below suggests a downtrend. Moving averages can also act as support and resistance. When the trend is strong, prices tend to stay away from the MA; when weak, prices tend to approach it.

Now I want to focus on how to set MA parameters to build your own trading system. I usually follow five steps:

**Step 1:** Determine your parameters. Choose one or more MAs to form your system and decide on the time frame. For example, using a 169 MA on a 4-hour chart as your base.

**Step 2:** Wait for entry signals. When candlesticks intersect or touch the MA, it triggers a signal.

**Step 3:** Execute trades. If the closing price is above the MA, go long; if below, go short. Keep the system simple—execute simply, don’t overthink.

**Step 4:** Set stop-losses. This is a fundamental rule. Place your stop-loss just beyond the high or low of the candlestick that triggered the signal—this is the minimum stop-loss rule. For more stability, add a 1-2% buffer. Once in profit, you can move your stop-loss to break even.

**Step 5:** Find take-profit targets. Usually, previous highs or lows of the cycle, or you can scale out gradually or set fixed risk-reward ratios based on your risk appetite.

Another important criterion: look at the risk-reward ratio. If your stop-loss is set too large, it’s better not to take the trade. During choppy markets, reduce trading frequency—prefer fewer trades over reckless ones.

A key reminder about the drawbacks of moving averages: the smaller the time frame, the more the MA and candlesticks tend to entangle during sideways movements, leading to frequent stop-outs. But this process also helps filter high-quality signals. Once a trend is established, you can add to your position in the direction of the trend—that feeling is truly fantastic.

The biggest risk in trading is emotional trading. Think carefully before opening a position, stick to your plan after entering, control your emotions, set your stop-loss and take-profit levels, and be patient. Some use $10k to counter-trend and end up blowing up their account; others use $100 to trend-follow and make small profits. The difference is here. Trading does involve luck, but skill and mindset are the main factors. Technical analysis might only account for 5-10%, while controlling emotions and disciplined execution make up 80-90%.

I recommend beginners verify their MA parameters through review and small live trades, tracking win rates and risk-reward. Start with small capital and lower timeframes, gradually moving to higher timeframes. Larger timeframes tend to produce more stable results. Remember: a bullish crossover indicates a buy signal; a bearish crossover indicates a sell signal. Fake breakouts should be cut quickly—don’t over-interpret them.

Finally, I want to say: with good technical skills, you don’t need to rely on others. What you learn yourself is your own. No need to follow others blindly or risk unnecessary losses. I hope everyone can find a trading system that suits them and pave their way to wealth.