How to answer ¿cómo estás? without sounding like lesson one

Nobody answers a greeting with a grade.

You said
Muy bien, gracias.
What it means: Very well, thank you. (stiff)
A local says
Todo bien, ¿y tú?
All good, and you?
Why: Muy bien, gracias is correct and a little stiff. A greeting expects a greeting back: bien, ¿y tú?
Passing a neighbour in Oaxaca
Muy bien, gracias.
…¿y yo qué? (silence, then a smile)

Muy bien, gracias isn't wrong. It just ends the conversation, because the other half of the exchange is missing: asking back. Bien, ¿y tú? or todo bien, ¿y usted? closes the loop, and it's what almost everyone says. Todo bien (all good) is the everyday default from Mexico down to Argentina.

A few more natural replies: ahí vamos (getting by), bien, bien (fine, fine), aquí, tranquilo (here, taking it easy), bien, ¿y la familia? if you know them. In Mexico, ¿qué onda? and ¿cómo va? are what friends actually ask, and todo bien answers both.

Match the pronoun to the person: ¿y tú? for people you'd use tú with, ¿y usted? for older people, shopkeepers, anyone you've just met formally. When in doubt in Mexico and Central America, usted with strangers is never wrong.

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Also worth knowing

SpanishEnglish
Todo bien, ¿y tú?All good, and you?
Ahí vamos, ¿y usted?Getting by, and you?
¿Qué onda? ¿Cómo va todo?What's up? How's everything?

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