Recently, while organizing my investment notes, I realized that many people still have some confusion about technical indicators like the monthly line and quarterly line. Actually, if these two tools are used well, they can greatly improve the accuracy of choosing buy and sell timing.

Let's first talk about how these lines are derived. Simply put, they are the average closing prices over different time periods, then connected and plotted on the candlestick chart. For example, the average of the most recent 5 trading days is the weekly line, the 20 trading days average is the monthly line, and the 60 trading days average is the quarterly line. Different cycle averages can reflect the overall cost position of investors who bought stocks during that period.

My personal habit is to categorize these indicators into three types. Short-term includes the 5-day and 10-day lines, suitable for short-term traders. Mid-term includes the monthly and quarterly lines, which I use the most, especially the quarterly line, as it is particularly helpful for judging medium-term trends. Long-term includes the 120-day and 240-day lines, mainly to observe the big picture.

How to use them? The most straightforward method is to observe the relationship between the candlestick and these moving averages. If the stock price remains above all these lines, it indicates that investors who bought during this period are in profit, which is a relatively safe buying position. Conversely, if the stock price is below the averages, those investors are at a loss, and the risk of subsequent decline is higher.

There is also a more practical signal called the Golden Cross and Death Cross. The Golden Cross occurs when the short-term cycle line crosses above the long-term cycle line, indicating strong short-term buying power, usually a buy signal. The Death Cross is the opposite, where the short-term line crosses below the long-term line, indicating that sellers are in control, and it’s time to consider exiting. The quarterly line is also very critical here; when combined with the monthly line, it can help confirm whether the trend has truly reversed.

Besides crossovers, the arrangement of the moving averages should also be observed. A bullish arrangement means all lines are sloping upward, from short to long cycle, which usually indicates an upward trend is about to start, suggesting active buying. A bearish arrangement is the opposite, with all lines sloping downward from long to short cycle, indicating a high risk of continued decline. There are also situations where the lines are flat or tangled, and in such cases, patience is needed until the trend becomes clear.

However, these indicators are not perfect. The biggest issue is lagging, because they are all based on past prices, so they react slowly to trend reversals, making it easy to miss the best timing. Additionally, if the stock price fluctuates sharply in the short term due to unexpected events, these indicators may give false signals, especially around important data releases, so extra caution is needed.

My advice is not to rely solely on the monthly or quarterly lines but to combine them with fundamental analysis. For example, look at the company's performance, profit margins, and other basic conditions, then use technical indicators to confirm buy and sell points. This way, you can capture medium-term trends without being confused by short-term volatility. Especially the quarterly line—I've now developed a habit of checking its status before making any decision, which helps me avoid many wrong trades.