Momo 100 Forex Trading Strategy
The idea behind this strategy is to use the momentum
indicator’s crossing over the 100 period EMA level as a
signal but filter out trades that are not in agreement with
the main trend.
The question is how do we determine the main trend?
To do this, we will be using the 100 Exponential Moving
Average (EMA).
This moving average is leaning towards the longer-term
trend.
As such, during a trending market, price would seldomly
whipsaw the 100 EMA, making it a good filter for the
momentum indicator’s crossing of the 100 level.
Still, it is not perfect. There will be times when the
momentum indicator would still whipsaw the 100 level.
But we will not be going in and out of the market on every
cross.
Instead, we will allow the market to take us out of the trade
by taking a loss only based on the stop loss.
The stop loss would be based on the most recent minor
swing highs and lows.
Indicators (both indicators are installed by default on MT4
and MT5):
Momentum
100-period EMA (green)
Timeframe: any but I prefer the higher time frame (H1, H4)
Currency Pair: any
Trading Session: any
Buy (Long) Trade Setup Rules
Entry
Price should be above the 100 EMA
The market should be in a bullish trend, making
higher swing highs and lows
Allow the momentum indicator to go below the 100
level on the retrace
Wait for the momentum indicator to go back above
the 100 level as the trend resumes
Take a buy market order on the confluence of the
above rules
Stop Loss
Set the stop loss on the most recent minor swing low
Take Profit
Set the take profit target price at 2x the risk on the
stop loss
Sell (Short) Trade Setup Rules
Entry
Price should be below the 100 EMA
The market should be in a bearish trend, making
lower swing lows and highs
Allow the momentum indicator to go above the 100
level on the retrace
Wait for the momentum indicator to go back below
the 100 level as the trend resumes
Take a sell market order on the confluence of the
above rules
Stop Loss
Set the stop loss on the most recent minor swing high
Take Profit
Set the take profit target price at 2x the risk on the
stop loss
Conclusion
This is a basic strategy using the momentum indicator’s
crossing of the 100 level.
What makes it different though is that it filters out trades
that aren’t on a longer-term trend by using the 100 EMA.
On the right market condition, this strategy should allow
you to get into trades that would trend quite longer.
However, because of the fixed take profit ratio, we could be
capping our profits, as you could notice on some of the
charts.
If you feel a bit aggressive, you could modify the exit
strategy. You could opt to use a trailing stop as an exit
strategy.
It could be by moving the stop loss as price makes new
swing highs or lows.
It could also be by using a fixed ATR. It is up to you.
Setting up a fixed take profit target though leans toward the
more conservative side.
It would also be good to complement this strategy with a
price action-based thesis. It could be a break of smaller
trendline, a candlestick pattern, or a price pattern.
This could increase the probability of a successful trade as
other traders might be taking the same trade but based on
a different price action-based strategy.
All in all, this strategy is something that could be added in
your arsenal of strategies and could be used in confluence
with other trading setups.
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