Today Raghee has talked about one of her favourite trade setups, namely the momentum trade. Now obviously this can have different meanings to different people. Not every "momentum trade" is the same - essentially, this is a very vague name, just a generic term for a trade that is gathering, or has already gathered pace.
Raghee of course, has her own specifics and interpretation concerning such setups:
"Trading entry styles often have similar names but completely different methods behind how to execute them. I wanted to first describe what I mean by a “momentum” trade. Momentum itself is simply movement, a surge higher or lower. That surge means much more when it is occurring within a sideways or range-bound market and higher or lower through nearby resistance or support."
Others will want to use the actual momentum indicator found in MT4. I personally don't use it, but I know others who do use it, and it can definitely be a useful tool in one's arsenal. Having said that, it's not a good idea just to put it on your charts for the sake of having more indicators in the hope that the more you have, the better filter job it will do when it comes to false signals.
Should you use the momentum indicator? I can't answer that, it's for you to find out. And then, if you do want to use it, what settings do you want to use? And then you need to test test and test to be comfortable with such settings. Forex is as much about trial and error when forming a method, as it is about formal education. Raghee herself doesn’t use it, instead relying upon her EMAs.
So, to demonstrate her idea of a momentum trade, Raghee uses today's EUR/USD chart.
"This morning’s EUR/USD is moving sideways across the 15 and 30-minute charts. So the first step to a potential momentum entry is to identify those time frames that are trading in a narrow, sideways, “three o’clock” angle. Now let’s identify the support and resistance levels..."
For further info concerning Raghee's setup, just visit:
https://www.ibfx.com/Corporate/post/2010/04/13/Setting-Up-a-Momentum-Trade.aspx
