Complete Guide to Moving Average (MA): From Beginner to Expert

Many people ask how to look at the MA moving average. Today, I will explain it thoroughly in the simplest way.

What exactly is MA?

The moving average is calculated by adding the closing prices of the past N days and then dividing by N, which forms a line. For example, the 5-day MA is the average of the closing prices over the last 5 days.

The calculation formula is very simple: MA = (C1 + C2 + C3 + C4 + C5) / 5

C is the closing price, n is the number of days.

Depending on the different cycles, the common ones are:

• Short-term: MA5, MA10 (5-day, 10-day moving averages)
• Mid-term: MA30, MA60 (30-day, 60-day moving averages)
• Long-term: MA100, MA200 (100-day, 200-day moving averages)

How to interpret when looking at charts?

There is an easily confusing point here — the time unit of the moving average changes with the K-line period.

For example, looking at the 1-hour chart: MA5 represents the 5 1-hour periods, which is the 5-hour moving average.

Looking at the 4-hour chart: MA5 represents the 5 4-hour periods, which is the 20-hour moving average.

Look at the daily chart: MA5 represents the 5-day moving average.

In practice, most people use the daily chart to view the four moving averages: MA5/MA10/MA30/MA60.

Five Major Characteristics of MA

1. Trend Tracking — Moving averages follow price trends, going up when rising and down when falling.

2. Lagging — This is the biggest weakness! When the price reverses, the moving averages react slowly, making it easy to get trapped.

3. Stability — Because it is an average, the fluctuations will not be particularly severe, which also leads to a lag.

4. Support for Price Increase and Decrease — After the price breaks through the moving average, it has the inertia to continue moving in that direction.

5. Support and Resistance — When rising, the moving average acts as support; when falling, it acts as resistance.

The Eight Principles of Graham (Simplified Version)

Bullish Signal (Long Entry Opportunity):

• The moving average turns from downward to upward, and the price breaks through the moving average → Buy
• Price breaks below the moving average but immediately rebounds, moving average is still rising → Buy
• Price is above the moving average, the drop did not break the moving average and rebounded → Continue buying
• Price plummets away from moving averages → Short-term rebound buying opportunity

Bearish Signal (Short Selling Opportunity):

• The moving average has turned from rising to falling, and the price has broken downward → Sell
• The price broke through the moving average but immediately fell, and the moving average is still declining → Sell
• The price is below the moving average, has risen without breaking the moving average and then has fallen → Continue selling
• Price surges away from the moving average → Short-term pullback shorting opportunity

The Four Most Common Patterns in Practice

1. Golden Cross (Bullish) When MA5 crosses MA10 from below, or MA10 crosses MA30/MA60 → bullish signal

2. Death Cross (Bearish) MA5 crosses down through MA10, or MA10 crosses through MA30/MA60 → bearish signal

3. Bullish Alignment (Strong Uptrend) The four moving averages are arranged in order from top to bottom: MA5 > MA10 > MA30 > MA60, all moving upwards to the right. This indicates that an upward trend has been established, with support at all levels, and there is a defense line for buying pressure.

4. Bearish Alignment (Strong Downtrend) The four moving averages are arranged in order from bottom to top: MA5 < MA10 < MA30 < MA60, all moving downwards to the right. This indicates that a downward trend has been established, with pressure at all levels, and there is a defense line for selling.

Key Points for Practical Application

Bullish Momentum: Prices are in a bullish arrangement above the moving average → Each time there is a pullback to the moving average, there is buying support → Prices rebound and continue to rise.

Bearish Pressure During Downtrend: Price is below the moving average in a bearish arrangement → Every rebound to the moving average faces selling pressure → Price continues to decline.

Turning Point: The moving average changes from rising to falling (a high point appears), or from falling to rising (a low point appears) → Possible reversal signal

Disadvantages of MA (Must Know)

• Slow to react to sudden market changes
• Easy to encounter fake signals (price repeatedly crossing the moving average)
• Simply looking at moving averages can easily lead to being trapped.

Solution: Combine candlestick patterns, trend lines, and other indicators, do not rely solely on moving averages.

Final words: The moving average system originates from the stock market, but the technology is fully applicable in the cryptocurrency space. Mastering the MA is not difficult; the challenge lies in knowing when to trust it and when to be cautious. By observing the market more in practical situations, one can truly understand what these lines are doing.