A Mechanical Day Trading System Using Moving Averages

As a day trader, you’re always looking for an edge in the market. You need a system that helps you make lightning-fast buy and sell decisions, while removing the emotion and uncertainty from the equation. That’s why we’re introducing you to a mechanical day trading system using moving averages and Fibonacci-tuned settings.

Fibonacci Numbers and Moving Averages

Fibonacci numbers are a sequence of numbers that are derived from adding the two previous numbers in the sequence. In the world of trading, Fibonacci numbers are often used to identify key levels of support and resistance, as well as to calculate the length of price retracements and extensions.

The 5-8-13 moving averages that we’re discussing here are Fibonacci-tuned settings that have stood the test of time. These moving averages serve as both a visual tool and a filter, helping you identify the best opportunities to enter and exit trades. By examining the relative relationships between moving averages and price, as well as the slopes of the moving averages, you can quickly determine the short-term momentum in the market.

In this mechanical day trading system, we will be using exponential moving averages (EMAs) as the 5-8-13 and a simple 50-day. The reason for using EMAs is that they react more significantly to recent price movements, providing a more accurate reflection of the current market conditions. On the other hand, the simple 50-day moving average is used as a trigger line because it’s widely followed and considered a benchmark in the trading industry. The combination of these two moving averages (simple and exponential) will provide us with a comprehensive outlook on the market and help us make informed decisions.

How to Use the System

The goal of this system is to follow momentum and make trades based on price action. It’s not designed to be used in stocks that are stuck in a trading range. Instead, it’s best used in stocks that are showing momentum in a particular direction.

When price crosses above the moving averages, it signals a potential buy opportunity. On the other hand, when price crosses below the moving averages, it signals a potential sell opportunity. The best signals often occur when price breaks out from a tight range that is located at the right side of a classical chart pattern.

For longer-term traders, the best signals occur on a triple cross that moves above the 50-day moving average. This moving average can act as a good longer-term trailing stop-loss order. A triple cross below the 50-day moving average is a sell signal.

It’s important to note that this system is not foolproof and can cause whipsaws if you don’t know how to implement it properly. That’s why it’s crucial to perform volume analysis and make sure that the stock you’re trading is showing strong momentum. Additionally, moving averages can become invalid in certain scenarios, such as when price consolidates within a continuation pattern such as a bull flag or ascending triangle.

Stop-Loss Orders

No matter what system you’re using, it’s important to always have a stop-loss in place. This will help you limit your potential losses in case the trade goes against you. You can choose to use either a moving average or a volatility stop, depending on your personal preference and risk tolerance.


The 5-8-13 moving average system can be a valuable tool for day traders, as long as you understand how to use it effectively. By removing the emotion and thinking from the equation, you can focus on following momentum and executing trades based on price action. Happy trading!

For more knowledge on the art of charting and the significance of having a stop-loss plan, be sure to check out our education section. Click HERE to read the full articles on having a plan with examples.

And if you liked this blog post, share it with a friend! Or don’t, we don’t really care. Just kidding, we definitely care! Sharing is caring and it will also give your friend a chance to improve their trading game. So go ahead, spread the knowledge like butter on warm toast.

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