Momentum trading is one of the vital viable ways to trade the forex market. Actually, there are lots of skilled profitable traders who include momentum as a part of their major criteria when making a trade decision.
Momentum trading is solely a way in trading wherein traders would make a trade within the direction of essentially the most recent strength or price. In physics, momentum is an element of speed and mass. The identical is true in trading, except that as a substitute of mass, traders search for volume. In other words, momentum trading is trading within the direction where price has recently moved within the least period of time with huge volume.
There are a lot of ways to discover momentum based on technical evaluation. There are oscillators that would help traders discover momentum and trend. There are also channel or band based indicators that may help traders discover momentum breakouts. Price motion and naked chart traders make use of a candle stick pattern called Marobozu, which is a full-bodied candle with no wicks, to assist them discover momentum price movements. I simply call such a candles as a momentum candle. When utilized in the proper context, confluences between these techniques can produce prime quality momentum indications which traders can use.
On this strategy, we shall be taking a look at how a mixture of those different techniques can produce a high-quality momentum setup which tends to provide good trades.
Darvas Box
The Darvas Box indicator is an easy channel based technical indicator which helps traders discover markets that would possibly be gaining strong momentum.
This indicator simply draws a channel based on essentially the most recent highs and lows of price motion. It then adjusts the channel as price motion creates latest highs and lows.
The Darvas Box indicator was developed by Nicolas Darvas. His trading philosophy was to easily buy into stocks which are making latest highs, which is one way or the other the concept behind momentum trading. With the concept of short positions now available, we may also take the identical concept and flip it over to trade currency pairs which are making latest lows.
Awesome Oscillator
The Awesome Oscillator (AO) is a technical indicator utilized by traders to discover trend direction and momentum. It’s an oscillator which is predicated on the concept of moving average crossovers.
The AO is solely an oscillator based on the difference of two moving average lines, namely the 5-period and 34-period Easy Moving Average (SMA) lines. Nevertheless, as a substitute of using the close of every candle as a basis for its computation, it makes use of the median of every candle as its basis.
Provided that the indicator is predicated on the difference of the 2 moving average lines, it might be said that the indicator is solely a crossover of two moving average lines. The advantage is that trend strength and weakness might be identified using this indicator.
The indicator simply plots the difference between the 2 lines as histogram bars. The colour of the bars also changes depending on the strength or weakness of the trend. Positive green bars indicate a strengthening bullish trend, while positive red bars indicate a weakening bullish trend. However, negative red bars indicate a strengthening bearish trend, while negative green bars indicate a weakening bearish trend.
The AO might be used as a trend direction filter. Traders can use the data regarding trend direction and strength to filter out trades that don’t conform with the direction of the trend. It could even be used as a trend reversal entry signal based on the crossing over of the bars from negative to positive or vice versa.
Trading Strategy
Darvas Momentum Signal Forex Trading Strategy is a momentum-based trading strategy which finds confluences between an envelope type momentum indicator, an oscillator type momentum indicator and a price candle signal.
First, we must discover the long-term trend direction based on the 200-period Exponential Moving Average (EMA) line. The long-term trend direction is predicated on the slope of the 200 EMA line, in addition to the final location of price motion in relation to the 200 EMA line. Price motion also needs to show a trending market based on the swing highs and swing lows.
Then, we shall be using the Awesome Oscillator to discover trend direction. This is solely based on whether the bars are positive or negative.
Entry signals are then qualified based on a momentum candle pushing against the Darvas Box indicator because it creates a brand new high or low.
Indicators:
Preferred Time Frames: 30-minute, 1-hour and 4-hour charts
Currency Pairs: FX majors, minors and crosses
Trading Sessions: Tokyo, London and Latest York sessions
Buy Trade Setup
Entry
- Price motion must be above the 200 EMA line.
- The 200 EMA line should slope up.
- The Awesome Oscillator bars must be positive.
- Enter a buy order as soon as a bullish momentum candle pushes the upper Darvas Box line.
Stop Loss
- Set the stop loss below the lower Darvas Box line.
Exit
- Set the take profit goal at 2x the danger on the stop loss.
Sell Trade Setup
Entry
- Price motion must be below the 200 EMA line.
- The 200 EMA line should slope down.
- The Awesome Oscillator bars must be negative.
- Enter a sell order as soon as a bearish momentum candle pushes the lower Darvas Box line.
Stop Loss
- Set the stop loss above the upper Darvas Box line.
Exit
- Set the take profit goal at 2x the danger on the stop loss.
Conclusion
This trading strategy is a simplistic approach to trading momentum. It trades momentum signals which are aligned with the major trend direction.
Provided that this strategy is predicated on the Darvas Box, it can be crucial to notice that the characteristics of the Darvas Box during a trending market is that it creates a staircase like structure with steps moving within the direction of the trend. That is formed as price pushes with momentum within the direction of the trend.
One of these trading strategy requires a certain feel for the market. Traders who could master trading within the direction of the trend and momentum with enough discipline to avoid trading trends which are losing steam could profit using this strategy.
Forex Trading Strategies Installation Instructions
Darvas Momentum Signal Forex Trading Strategy is a mixture of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to rework the gathered history data and trading signals.
Darvas Momentum Signal Forex Trading Strategy provides a chance to detect various peculiarities and patterns in price dynamics that are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
Really useful Forex MetaTrader 4 Trading Platform
- Free $50 To Start Trading Immediately! (Withdrawable Profit)
- Deposit Bonus as much as $5,000
- Unlimited Loyalty Program
- Award Winning Forex Broker
- Additional Exclusive Bonuses Throughout The 12 months
>> Claim Your $50 Bonus Here <<
Click Here for Step-By-Step XM Broker Account Opening Guide
Easy methods to install Darvas Momentum Signal Forex Trading Strategy?
- Download Darvas Momentum Signal Forex Trading Strategy.zip
- *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you wish to test your forex strategy
- Right click in your trading chart and hover on “Template”
- Move right to pick Darvas Momentum Signal Forex Trading Strategy
- You will note Darvas Momentum Signal Forex Trading Strategy is out there in your Chart
*Note: Not all forex strategies include mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
Click here below to download:
Get Download Access