Best trading strategy
Implementing the best possible momentum trading strategy is the ideal way to build and manage your trading account. Our team at Trading Strategy Guide believe that momentum indicator strategies can reduce risk. It can also enhance your overall profits. We’ve covered this strategy in our comprehensive guide to the best trading strategies we’ve discovered.
Momentum trading is a very hot topic in trading. According to the efficient market hypothesis, it should not exist. But its effects were widespread, and it was used by many Wall Street elites. They made billions of dollars in billions of dollars in profits.
We will look at core market principles. The main thing is momentum ahead of price. In this sense, a momentum indicator strategy is like a trend following strategy. For a simple yet effective strategy, we recommend revisiting the Trend Trading Strategy .
Before diving into the best momentum trading strategies, let’s define what a momentum indicator trading strategy is:
What is momentum?
Momentum is borrowed from Newton’s first law of motion. The law states that when an object is in motion there is a tendency to stay in motion until an external force is applied to it. Just like in the laws of physics, a market in motion tends to stay in motion rather than invert. This is why a momentum indicator strategy is so powerful.
Also, read about Fading Momentum in Forex Trading .
So an up instrument tends to keep going up:
And instruments that are going down tend to keep going down:
Basically the trend tends to continue and we can use momentum to determine when to buy and when to sell. This is because instruments with positive momentum tend to have positive returns in the near future. And vice versa for those with negative motivation. This is why we have found that momentum is often the best indicator for swing trading .
There are many explanations as to why the bullish momentum occurs. Each bias has its own name and explains the psychology behind it.
The simplest explanation is that rising prices attract buyers and falling prices attract sellers. Our best momentum trading strategy is based on this simple explanation.
Pretty simple isn’t it?
Using the momentum indicator strategy, it means we will hold the trade for a short period of time. Anywhere between a few minutes and up to a few days. Basically, the best momentum trading strategy runs until momentum is exhausted.
So we just want to focus on the relative power of any given instrument.
Currently….
Before we move forward, we must determine which technical indicator we need. This will help us choose the best momentum trading strategy and how to use it:
There is a wide range of different momentum indicators. But the best forex momentum indicator by far is the Williams%R indicator. The best forex momentum indicator will help us identify profitable intraday trading opportunities.
The best forex momentum indicator is named after the legendary trader Larry Williams who invented it. Larry Williams used the best forex momentum indicator to great success. He won millions of dollars in profits.
So this gives some credence to the best forex momentum indicator.
The preferred settings for the best forex momentum indicator are 40 periods.
The Williams %R runs on a scale of -100 to 0. A reading in the vicinity of -100 is an indication that the instrument is oversold. This means it’s a potential buying opportunity. When it reaches 0, it is a sign of overbought and possibly time to sell.
Now let’s see how you can trade effectively with the best momentum trading strategy. You will learn how to profit from using the best forex momentum indicator. We are also trained in how to use the power of money to trade successfully.
The best momentum trading strategy using the best Forex momentum indicator
Our team at Trading Strategy Guide believe that smart trading is the way to build the best momentum trading strategy. In this regard, we don’t want to predict when momentum will hit, but we let the market tell him and then react.
One principle of the momentum indicator strategy is, buy high to go higher and sell low to go low. In other words, we trade in the direction of the trend while having momentum on our side. Also read the hidden secrets of the moving average.
Moving forward, we present the buy-side rules of the best momentum trading strategy.
Step #1: Identify the trend. An Uptrend is defined by a series of HHs followed by a series of HL.
The definition of an uptrend is pretty standard. In an uptrend, we look for a series of higher highs followed by a series of higher lows. Two HHs followed by at least two other HLs are enough to define an uptrend.
A swing high is simply a swing high that is higher than the previous swing high. While a higher low is simply a lower low than the previous low.
All momentum traders know that the trend is our friend. But without the driving force behind the trend, we might not really have any trend at all.
For active traders, we also look at actual price action to gauge momentum. Besides reading the best forex momentum indicators.
Step #2: In a trend look for bold candles that close near the top of the higher candlestick.
One technical analysis concept is that you want to use multiple confirmations when buying and selling. This will increase the likelihood that it is a high probability trade setup.
In this regard, the momentum trading strategy besides using the best Forex momentum indicator, also incorporates price action.
A practical way to read momentum from a price chart is to simply look at the candle length. What we want to see in an uptrend are big, bold bullish candles located near the top of the higher candlestick.
In the image above, we have an ideal representation of what we are looking for. The bullish price movement is preceded by large bullish candlesticks. This confirms the driving force behind the trend.
Now it’s time to focus on Williams %R. This is the best forex momentum indicator. This brings us to the next step of the momentum indicator strategy.
Step #3: Wait for the best Forex Momentum Indicator to be oversold (below -80). Then rally above the -50 level before buying.
We will use Williams %R, the best forex momentum indicator intelligently. In an uptrend, we buy after the best forex momentum indicator has reached oversold conditions (below -80). And then rallied back above the -50 level.
Now, we have confirmation from both the best forex price and momentum indicator. The real driving force behind this trend and the probability in favor of the price is more bullish from here on out.
Note * If the best forex momentum indicator is continuously in the overbought zone (above the -20 level), it signals a strong momentum and vice versa a strong trend. Conversely, the same is true in a downtrend.
The next important thing we need to set up is where to place our protective stop.
See below…
Step #4: Place your protective stop loss below the recent higher low.
We want to hide the loss of our protection. It is below the highest recent low formed just before the best momentum trading strategy gave a buy signal.
Alternatively, you can also trail your stop loss below the most recent swing low. This strategy will allow you to lock in potential profits in the event of a sudden market reversal.
Last but not least, the momentum indicator strategy also needs a place where we need to take profits, which brings us to the last step of the best momentum trading strategy.
Step #5: Take Profit when we cross the Low before higher
A trend in motion can stay in that state longer than anyone can predict. And since we wanted to maximize our potential profits, we let the market advise us before liquidating our trades. In this regard, we look for a break in the trend structure. Respect a break below the recent swing high.
Also, you can take profit when the best forex momentum indicator breaks below the -50 level.
Note ** The above is an example of a BUY trade using the Best Trading Strategy. Use the same rules for a SELL trade. In the image below you can see an example of an actual SALE transaction.
Watch:
In brief
The best momentum trading strategy drives the price trend of the market to keep moving in a single direction. This is where momentum can go up or down. In essence, market timing is crucial for a momentum indicator strategy. And for this, we have incorporated the best Forex momentum indicator (Williams %R) in our momentum strategy. Here are some trading conditions you want to avoid in the forex market.
Timing the market can be a daunting task. But our team at Trading Strategy Guide believes that using a pure price action can go a long way. Check out our Pin Action Price Trading Strategy .