This is THE BEST MOMENTUM trading strategy.
“Momentum” simply means BUY something if it is going up, and SELL it if it is going down.
There have been several academic surveys showing that applying this principle to all kinds of speculative markets is profitable over time and gives a winning trading “edge”.
Another type of Forex momentum strategy is a “best of” momentum trading strategy which buys those assets that are going up the most strongly and sells those going down most strongly.
This also tends to work well and in fact, tends to produce a greater reward to risk ratio than simple momentum strategies.
I am going to outline a Forex ‘Best of” Momentum Strategy that I have developed below, with backtest results.
One of the core market principles is that momentum precedes price so in this sense a momentum indicator strategy is more like a trend following strategy.
And implementing “ForexWOT Momentum Trading Strategy” can be the best way to build and manage your trading account.
- Best Time Frames: H4 and D1 (for high accuracy signals)
- Most Recommended Currency Pairs: EURUSD, GBPUSD, EURJPY
- Bollinger Bands
- 8 Exponential Moving Average
- Signal Trend
- CCI Histo
- Relative Strength Index
- 8EMA line above the 20-day SMA (middle Bollinger Band)
- CCI Histo green color
- Relative Strength Index line upward and above 53 level
- Price breaks above the upper Bollinger Band after a period of price consolidation
- 8EMA line below the 20-day SMA (middle Bollinger Band)
- CCI Histo red color
- Relative Strength Index line downward and below 47 level
- Price breaks below the lower Bollinger Band after a period of price consolidation
For stop losses, I like to use the upper an lower Bolinger Bands. Yes, i know…, it takes experiences to manage “Stop Losses” manually. But it’s inevitable.
Targets can be multiples of your risk or target opposing price structures.
You can also use an indicator (ex. Pivots indicator) that may be suitable for that purpose to keep your profit taking objectives.