Short Term Momentum Trading Forex Strategy

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Published: 09th November 2010
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Many traders lack the patience to watch their trade turn into a profit after a few hours or more. What they want is a forex strategy that turns into a profit within minutes of entering into the trade. These type of traders can't see their trade going against them. They immediately abandon such a trade without waiting for a few hours for it to turn profitable.

For these type of traders short term momentum trading is the best forex trading strategy. The aim of this short term momentum trading strategy is to hit the profit target as early as possible. This is achieved by entering the market long or short when the momentum is on your side.

In this short term momentum forex trading strategy, we will be using the 20 day Exponential Moving Averages (EMA), the 100 day Simple Moving Average (SMA) and the Moving Average Convergence Divergence (MACD). The exponential moving average places more weight on the recent price action as compared to the simple moving average which is what we will need in this short term momentum trading strategy.

You will be using the default setting for the MACD. These setting are First EMA=12, Second EMA=26 and the Signal EMA=9. You will be trading on the 5 minutes chart.

Open the 5 minutes chart. Look for a currency pair that is trading below the two moving averages. Wait for it to start trading above both the 20 Day EMA as well as the 100 Day SMA.

Look at the MACD histogram. Enter into a long trade within 5 candles of the MACD turning positive. Place the stop loss at the low of the candle that broke above both the 20 day EMA and the 100 day SMA.

Exit half of the position when the trade turns in your favor by the amount risked. For the remaining position use a trailing stop with 20 day EMA minus 15 pips.

In case, the currency pair is trading above both the 20 day EMA and the 100 day SMA, wait for it to trade below both the moving averages by at least 15 pips. Enter into a short trade within five candles of the MACD turning negative. Place a stop loss at the high of the first candle that broke above both the 20 day EMA and the 100 day SMA. Wait for the trade to turn profitable by the amount risked. Exit half of the position and trail the remaining position with a trailing stop with 20 day EMA plus 15 pips!


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Mr. Ahmad Hassam has done Masters from Harvard University. Get these Forex Bully Power Indicators FREE! Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade!

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