Momentum Drive Forex Trading Strategy

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Momentum Drive Forex Trading Strategy

Greed is one of the main reasons why traders lose money trading the forex market. Many new traders are lured to trade the forex market because of the huge returns that they see other traders get. Traders often want to strike it big right away. So, traders would often aim for the stars when trading the forex market. They would try to earn huge returns with the least amount of risk. Often, traders aim for impossible targets. This would often make what should have been winning trades to turn into losing trades. This is probably one of the most painful scenarios when trading the forex market.

However, contrary to popular belief, trading is not a get rich quick scheme. Instead, it is a daily grind. Traders have to slowly but surely grow their accounts little by little. Instead of aiming for impossible targets, it is sometimes best just to allow the market to tell you what it wants to give you. Instead of holding on to a trade hoping that price would go further in a certain direction, traders should have a means to identify earlier if the market is about to reverse against their positions. Traders who could mechanically enter and exit the market based on a logical condition can earn consistent profits from the forex market.

Candles Stop

Candle Stop is a custom momentum technical indicator which is a variation of a channel type of indicator.

This indicator plots to dashed lines which follow the movement of price action. These lines are plotted based on a historical movement of price extremes. The lines are basically the highest and lowest points of price action within a set period and is shifted to the right. This creates a channel like structure which would mark extreme price movement levels.

The dashed lines can be used as a volatility indicator. Given that the lines are based on price extremes, traders can now easily visualize if price action is contracting or expanding. The lines contract as market volatility contracts and expands as market volatility expands.

The lines could also be used as a basis for momentum breakouts. A strong momentum candle breaking outside of the channel could indicate that the market is breaking out of a market contraction phase and may start to trend. These setups can be used by traders who trade momentum strategies.

The lines could also be used as a stop loss basis or a trailing stop loss marker. Given that the lines are based on price extremes, traders can place stop losses on the line opposite to the direction of their trade.

Drive

Drive is a custom technical indicator which is part of the oscillator family of technical indicators. It identifies and indicates momentum based on two oscillating lines.

This indicator plots two lines, one line is green, and the other line is red. Trend direction or momentum is identified based on how the two lines overlap.

The market is said to be bullish whenever the green line is above the red line, and bearish whenever the green line is below the red line.

This indicator can be used as a momentum filter indicator, preventing traders to trade against the direction of the current market momentum. It can also be used as an entry signal provided that it is in confluence with other complementary trading signals.

Trading Strategy

Momentum Drive Forex Trading Strategy is a simple momentum trading strategy based on two complementary technical indicators.

First, we should identify a market that has just started to reverse and is beginning a new trend. This is identified based on the characteristics of price action, as well as price action crossing over the 50-period Exponential Moving Average (EMA) line.

Then, we wait for price action to confirm the new trend based on its retracement back towards the direction of the 50 EMA line, followed by a price rejection with strong momentum.

The retracement can be identified based on price closing within the area of the Candle Stop lines.

This should then be followed by a strong momentum candle closing outside of the Candle Stop lines towards the direction of the new trend.

This momentum breakout setup should then be confirmed by the Drive indicator. The confirmation is based on how the green and red lines overlap, which should agree with the trend direction of price action and the 50 EMA line.

Indicators:

  • CandleStop
  • 50 EMA
  • Drive

Preferred Time Frames: 15-minute, 30-minute, 1-hour and 4-hour charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price action should cross above the 50 EMA line.
  • The 50 EMA line should start to slope up.
  • Price action should retrace back to the area between the two lines of the Candle Stop indicator.
  • A strong bullish momentum candle should close above the magenta line of the Candle Stop indicator.
  • The green line of the Drive indicator should be above the red line.
  • Enter a buy order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss below the entry candle.

Exit

  • Close the trade as soon as the green line of the Drive indicator crosses below the red line.

Momentum Drive Forex Trading Strategy

Momentum Drive Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price action should cross below the 50 EMA line.
  • The 50 EMA line should start to slope down.
  • Price action should retrace back to the area between the two lines of the Candle Stop indicator.
  • A strong bearish momentum candle should close below the lime line of the Candle Stop indicator.
  • The green line of the Drive indicator should be below the red line.
  • Enter a sell order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss above the entry candle.

Exit

  • Close the trade as soon as the green line of the Drive indicator crosses above the red line.

Momentum Drive Forex Trading Strategy 3

Momentum Drive Forex Trading Strategy 4

Conclusion

This is a new type of momentum breakout strategy which is based on the Candle Stop indicator.

Much like with other momentum breakout trading strategies that incorporate band-based indicators, this indicator also works well because it identifies market contractions and expansions.

However, this strategy is geared towards shorter-term trends. It trades with the direction of the new trend while trading on breakouts.

When trading this strategy, it is also best to take note of price breaking beyond the previous minor swing point. This ensures that the previous support or resistance level was broken.


Forex Trading Strategies Installation Instructions

Momentum Drive Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.

The essence of this forex strategy is to transform the accumulated history data and trading signals.

Momentum Drive Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.

Based on this information, traders can assume further price movement and adjust this strategy accordingly.

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How to install Momentum Drive Forex Trading Strategy?

  • Download Momentum Drive 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 want to test your forex strategy
  • Right click on your trading chart and hover on “Template”
  • Move right to select Momentum Drive Forex Trading Strategy
  • You will see Momentum Drive Forex Trading Strategy is available on your Chart

*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.

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