How to stop loss when the monthly moving average crosses + the weekly line falls below the previous low + the daily line pulls back to the 20-day line?

A multi-timeframe strategy using monthly, weekly, and daily signals helps identify high-probability entries, with stop-losses set below key support levels to manage risk effectively.

Jul 25, 2025 at 06:43 am

Understanding the Key Indicators in the Strategy

When applying a multi-timeframe technical analysis approach, it's essential to fully understand each component of the condition. The strategy described combines signals from the monthly, weekly, and daily charts. The first trigger is a monthly moving average crossover, which typically refers to a shorter-term moving average (such as the 5-month MA) crossing above a longer-term one (such as the 10-month MA), signaling a potential long-term bullish shift. This is a foundational signal that sets the stage for further confirmation.

The second condition is the weekly price falling below the previous low, which introduces a bearish countertrend move within the broader bullish setup. This may indicate short-term weakness or profit-taking after a rally. The third condition — the daily price pulling back to the 20-day moving average — suggests a test of short-term support. The 20-day moving average is widely watched by traders as a dynamic support level in uptrends. When price returns to this level after a rally, it often presents a potential re-entry or stop-loss adjustment opportunity.

Defining the Stop-Loss Logic in This Context

In this scenario, the stop-loss is not based on a single signal but on a confluence of multi-timeframe data. The goal is to protect capital while allowing room for normal market volatility. The monthly MA crossover implies a long-term bullish bias, so the stop-loss should not be placed too tightly, which could lead to premature exits. However, the weekly breakdown below the prior low increases downside risk, requiring a more defensive posture.

The daily pullback to the 20-day MA serves as a tactical reference point. If price holds above this level, the uptrend may resume. If it breaks below, it could confirm weakness. Therefore, the stop-loss should be positioned just below a key support zone that incorporates all three timeframes. A common method is to set the stop-loss beneath the lowest point of the weekly bearish move, adjusted for daily volatility.

Step-by-Step Process to Set the Stop-Loss

• Identify the exact monthly moving average crossover point. For example, if the 5-month MA crossed above the 10-month MA in March, note the price level at that time.
• Locate the most recent weekly low before the current pullback. Suppose the weekly candle closed at $30,000, and the prior week’s low was $28,500 — this becomes a key reference.
• On the daily chart, pinpoint where the price touches or approaches the 20-day MA. If the 20-day MA is currently at $29,200, monitor how price reacts at this level.
• Determine the lowest intraday price during the weekly decline. If the price dropped to $28,300 during the week but closed at $28,500, use $28,300 as a volatility buffer.
• Set the stop-loss order at 1% to 2% below this weekly low, depending on the asset’s typical volatility. For a cryptocurrency like Bitcoin, a 1.5% buffer below $28,300 would place the stop at approximately $27,875.

This layered approach ensures the stop-loss accounts for long-term trend confirmation, short-term breakdowns, and daily support testing.

Using Technical Tools to Confirm the Stop-Loss Level

To enhance accuracy, traders can use volume profile and average true range (ATR) indicators. The ATR on the weekly chart helps determine a realistic stop distance. If the 14-period ATR is $1,200, placing the stop less than $1,000 below the low may be too tight and prone to being hit by noise.

Additionally, horizontal support levels from previous price action should be considered. If $28,000 was a strong support level in the past, combining it with the weekly low strengthens the case for placing the stop just below it. Fibonacci retracement levels from the last major swing high to low can also validate the 20-day MA pullback. If the 50% retracement aligns with the 20-day MA near $29,200, it increases the significance of that zone.

Charting platforms like TradingView allow drawing these confluences simultaneously. Overlay the monthly MA crossover date, mark the weekly low, plot the 20-day MA, and use horizontal lines for key support. This visual confirmation reduces emotional decision-making.

Executing the Stop-Loss Order on an Exchange

Once the stop level is calculated, the next step is placing the order. On most cryptocurrency exchanges such as Binance, Bybit, or Kraken, follow these steps:

• Navigate to the spot or futures trading interface, depending on your position type.
• Select the "Stop-Loss" order type from the dropdown menu.
• Enter the exact stop price determined from the analysis (e.g., $27,875).
• Choose whether to use a limit or market stop-loss. A stop-market order executes immediately once the price hits the trigger, ensuring exit but risking slippage. A stop-limit order sets a limit on the execution price but risks non-execution in fast markets.
• For volatile crypto assets, a stop-market is often safer to guarantee exit.
• Double-check the order size matches your current holdings or position size.
• Click "Place Order" and verify the stop appears in your open orders or active stops section.

Some platforms allow trailing stop-loss orders, but in this strategy, a fixed stop based on technical levels is more appropriate due to the specific multi-timeframe conditions.

Managing Risk and Position Size Alongside the Stop-Loss

Setting the stop-loss is only one part of risk management. The position size must be adjusted so that the potential loss does not exceed a predetermined percentage of the trading account. For example, if the account size is $10,000 and the risk per trade is limited to 2% ($200), and the stop is $975 below the entry ($28,850 to $27,875), then:

• Calculate the dollar risk per unit: $28,850 - $27,875 = $975.
• Divide the total risk allowance by the per-unit risk: $200 / $975 ≈ 0.205 units.
• Therefore, the maximum position size should be approximately 0.205 BTC.

This calculation prevents overexposure. Using leverage in futures trading amplifies both gains and losses, so the stop-loss distance must be widened proportionally to avoid liquidation from normal volatility.

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Frequently Asked Questions

What if the 20-day moving average is rising sharply—should the stop-loss be adjusted upward?

Yes. If the 20-day MA is trending up strongly, the stop-loss can be placed slightly below the moving average rather than the weekly low, especially if price shows strong momentum. The key is to respect the dynamic support provided by the rising MA.

Can this strategy be automated using bots or scripts?

Yes. Platforms like 3Commas, Gunbot, or custom Pine Script on TradingView can be programmed to detect the monthly MA crossover, monitor weekly closes below prior lows, and trigger alerts when the daily price touches the 20-day MA. From there, a bot can place a stop-loss order automatically.

How do I handle false breakouts below the weekly low?

Use a confirmation candle. Wait for the weekly candle to close below the prior low. Intraday wicks below the level that close back above should be ignored. On the daily chart, a strong bullish reversal candle (like a hammer or engulfing pattern) at the 20-day MA adds confidence that the pullback is ending.

Does this strategy work the same on altcoins as it does on Bitcoin?

The framework applies, but altcoins often have higher volatility. Adjust the stop-loss buffer accordingly—sometimes 3% to 5% below the low may be needed. Also, ensure sufficient trading volume and exchange support for reliable moving averages.