How to Use a 5-8-13 Simple Moving Average Combination for Day Trading

Day trading success hinges on the ability to make split-second decisions based on real-time price moves. While many traders rely on raw price action alone, incorporating the right moving averages can significantly improve your trading accuracy and ability to manage risk. These technical indicators are potent as filters to help identify the best entry and exit points and when the conditions are too risky for active trading.

Their effectiveness for day trading depends on selecting the best moving average settings. When properly configured, these indicators can benefit various trading approaches, from quick scalping to full-day positions. Most importantly, the same moving average settings can work across different time frames, so you can adjust your analysis simply by changing the chart interval—whether it’s a one-minute chart for scalping or a 15-minute chart for longer intraday holds.

5-8-13 Moving Averages

For day traders seeking a reliable technical framework, combining five-, eight-, and 13-period SMAs can be particularly worthwhile. These settings are derived from Fibonacci numbers and have been used successfully by traders across diverse market conditions. However, success with this strategy requires more than simply plotting these lines on a chart—it demands understanding the interplay between price action and the moving averages themselves.

The combination can reveal several key aspects of market behavior:

• Momentum shifts: When the shorter-term averages (five and eight) cross above the 13-period SMA with positive slopes, upward momentum is growing stronger.
• Trend confirmation: Price action above all three averages, with the SMAs properly aligned (five above eight, eight above 13), can help confirm an uptrend.
• Risk assessment: The relative spacing and slope of the moving averages provide instant feedback about trend strength and potential reversals.
• Market structure: During strong trends, prices tend to find support and resistance at these key levels, particularly the eight- and 13-period SMAs.

This approach provides clear signals for both long and short positions. Bullish setups occur when the price pulls back to the moving average cluster during uptrends, while bearish short selling prospects emerge when resistance forms at a cluster during downtrends.

Just as important, the moving averages help identify choppy or trendless conditions when traders should stay on the sidelines.

Examples Using Moving Averages

The price action for the Invesco QQQ Trust (QQQ) shown above signaled a trend reversal using the 5-8-13 bar SMAs, as illustrated in the bottom left of the chart (A). Later in the trading session, around the lunch hour, there was a test of the uptrend (B). The test didn’t result in a reversal, and the exchange-traded fund continued to rise in early afternoon trading.

At (C), the 5-8-13 bar SMAs signaled a pause. This lasted until the end of the trading session. At the beginning of the new trading session, (D), the uptrend resumed until another pause occurred at (E) during the lunch hour.

The first leg of the uptrend, (A) to (C), lasted 51 five-minute bars and generated 2.59 points or 0.79% without adding spreads and commissions. The second leg of the uptrend, (D) to (E), lasted 35 bars and created 2.64 points or 0.8% without adding spreads and commissions.

Recognizing When to Stay Out of the Market

While finding profitable trading opportunities is crucial, knowing when to remain on the sidelines is equally important for day trading success. The 5-8-13 SMA combination is great for highlighting two specific market conditions where active trading carries excessive risk:

Trendless Markets

When the market lacks directional momentum, the moving averages will do the following:

• Compress into a narrow band
• Move horizontally rather than show clear slopes
• Generate frequent crossovers with minimal follow-through
• Show price action oscillating rapidly above and below all three averages

These conditions typically result in multiple false signals and increased transaction costs from failed entries.

High-Volatility Periods

Periods of elevated market volatility are signaled by the following:

• Widely spaced moving averages with erratic crossovers
• Price bars extending far beyond the moving average cluster
• Sharp reversals that quickly annul apparent breakouts
• Expanding trading ranges with poor follow-through on moves

These conditions often trap traders in positions with unfavorable risk-reward ratios, leading to larger-than-expected losses when stops are hit. The ability to recognize these signals and act accordingly—by either reducing position size or temporarily suspending trading—often makes the difference between consistent profitability and account drawdowns.

For example, at (C), QQQ bobs and weaves through an afternoon session in a choppy and volatile pattern, with price whipping back and forth in about a 1-point range. The SMAs show similar whipsaws, with multiple crossovers but little alignment between moving averages. These high noise levels warn the observant day trader to pull up stakes and move on to another security.

The Bottom Line

While searching for the best technical indicators may be endless, the 5-8-13 SMA combination offers day traders a robust framework. Its strength lies not just in generating buy and sell signals but in its ability to adapt to different trading styles and time frames.

However, success requires more than simply plotting these moving averages on a chart. Traders should combine these SMAs with other technical indicators for signal confirmation, practice reading the subtle interactions between price and the moving averages, respect the defensive signals that warn of unfavorable market conditions, and customize the approach to align with their trading style and risk tolerance.