Which one is more formal and natural:
1.You can wave to say hello.
2.You can greet them by waving hello

Question

Answer

Number one sounds simple and natural. Number two sounds more formal.

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I agree with Dave. :)

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I agree! Number one is how I would say this normally, and it sounds very natural.
Number two is correct, but sounds more formal or professional. It also sounds more like an instruction or advice than number one. :)

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In both sentences, "hello" needs to be in quotes.

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Option 2 is more formal and natural:
"You can greet them by waving hello."

It sounds smoother and more appropriate in formal or polite contexts.