Recently, new traders have been asking me how to use moving averages for trading, so I might as well organize my experience and share it with everyone. Honestly, the simple moving average (SMA) is the first indicator I learned when I entered technical analysis, and it’s also the most practical.

In simple terms, SMA is calculated by adding up the closing prices over a certain period and then dividing by the number of days. It sounds simple, but this indicator helps you see the true trend of the price and filters out short-term fluctuations. I often use it to determine whether an asset is in an uptrend or a downtrend. For example, suppose the prices over the past 15 days are 30, 35, 38, 29, 31, 28, 33, 35, 34, 32, 33, 29, 31, 36, 34; then the 10-day moving average is the average of the first 10 days. The first data point is (30+35+38+29+31+28+33+35+34+32) divided by 10, which equals 32.6. The next data point drops the first day’s 30, adds the 11th day’s 33, and calculates the average again. Continuing this process creates a smooth trend line.

In practical trading, I mainly use two methods. The first is the most straightforward—watch when the price line (candlesticks) crosses the moving average. When the price breaks above the average from below, it usually indicates an upcoming uptrend, so I consider buying. Conversely, if the price falls below the average from above, it’s generally a sell signal.

The second method involves using two SMAs of different periods. For example, the 20-day and 50-day SMAs. When the short-term line crosses above the long-term line, it’s called a “golden cross,” which is a bullish signal. Conversely, when the short-term line crosses below the long-term line, it’s called a “death cross,” indicating a possible downtrend. This method is much more reliable than just watching a single line.

Regarding practical application, setting up SMA lines in most trading software is quite similar. Usually, you need to find the technical indicators menu, search for moving averages, and then set the period you want. For example, if you want a 20-day SMA, just set the parameter to 20. I recommend setting different colors for each line so it’s clearer when viewing the chart. Typically, I set up the 10-day, 20-day, 50-day, and 200-day lines—using the 10-day and 20-day for short-term, the 50-day for mid-term, and the 200-day for long-term trends.

However, I want to remind you that SMA is based on past data, so it has a lag. In choppy markets, prices often bounce around the moving averages, creating many false signals that can confuse traders. That’s why I never rely on SMA alone; I always combine it with indicators like RSI or MACD to filter out false signals. This way, my trading success rate improves.

Currently, when I monitor the market on Gate, I often use this set of SMA configurations combined with other indicators to make decisions. If you want to try this method, you can set up your indicator combination in Gate’s trading interface and gradually find a rhythm that suits you.