Momo Play Forex Trading Strategy
Table of Contents
One of the most popular stock day trader uses a momentum day trading strategy, also known as a “Momo Play”, and rightfully so because he was able to turn his few hundred bucks to several hundred grand. Although the strategy which we will be exploring today isn’t exactly his strategy, we will still be learning a momentum play that could be incorporated in forex day trading.
Momo plays are very popular among traders because of the big moves that traders are able to catch in just a few minutes in a day. You see a big move, you get in, you get out, and hopefully at a profit.
The concept behind momentum trades is the idea that price moves with a strong force or velocity, should have enough momentum that should carry the move to the next time periods, and might even start a short rally. Think of it as a big freight truck running at 100 km/h. If the driver would try to hit the break, it surely wouldn’t stop in a split second. The freight truck would still continue moving for several meters before it could stop. The same is true with price moves. If a price move has so much weight behind it (a large number of traders) and the move happens at a high speed (price moves by so many pips in a few minutes), then it should have a strong momentum behind it. This is the concept that momo traders are banking on.
Many traders use it as a cornerstone for their trading, especially among breakout traders. So, we will be exploring a momo strategy which you could start with and employ in your own trading.
The Setup: Breakout Momo Play
Momo plays tend to be more effective on the lower timeframes. This might be because momentum usually dissipates in a period of time. Momentum can’t seem to sustain itself for such a long time. For this reason, momo plays are usually effective for day trading as opposed to swing trading. Since this strategy is a day trading momo play, we will be using the 5-minute chart.
This would also be done on a naked chart. No indicators, just pure skill in identifying specific points in the chart and price moves. There are just a couple of things you would need to learn to identify – highs and lows, and momentum candles.
Highs and lows will serve as our basis for support and resistance as since these are areas where price previously reversed, these are in effect natural areas of support or resistance. These price points will be the area where we will be looking for breakouts, either to the upside or the downside.
The second thing that we should learn to identify are momentum candles. These will be candles that are long, big bodied candles with small wicks. The usual examples will be you Marubozu candles and engulfing patterns. For a start, trade only these two candles.
So, how would we use the momentum candles and our high-low support or resistance? What we will be looking for are breakouts from our high or low support or resistance made by a momentum candle. It shouldn’t be candles that just barely broke through the support or resistance, but candles that have really punched a hole through the support or resistance. These types of scenarios will be our setups.
- Identify a recent high on the 5-minute chart to serve as our resistance
- Wait for a momentum candle to close strongly beyond the resistance
- Set a pending buy stop order at the high of the momentum candle
Stop Loss: Set the stop loss at the low of the momentum candle
Exit: Trail the stop loss at the low of the two previous candles every time a candle makes a new high
- Identify a recent low on the 5-minute chart to serve as our support
- Wait for a momentum candle to close strongly beyond the support
- Set a pending sell stop order at the low of the momentum candle
Stop Loss: Set the stop loss at the high of the momentum candle
Exit: Trail the stop loss at the high of the two previous candles every time a candle makes a new low
This strategy is just one of the many different variations of momentum breakout strategies. Some use trend continuation breakouts, others use pattern day trading breakouts, others use trendline breakouts, etc. I would like to consider this type of breakout strategy as more of a market flow breakout strategy. Market flow because we are considering recent highs and lows as supports and resistances as price areas of breakout, which is somewhat a market flow type of analysis.
Other variations include setting take profit targets on the next support or resistance. If you are quite well versed in price action trading and candlestick patterns, you may also opt to have manual exit variations on reversal candles or price rejection candles.
Study the concept, tweak it, and make it your own.
Forex Trading Systems Installation Instructions
Momo Play Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex system is to transform the accumulated history data and trading signals.
Momo Play 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 system accordingly.
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How to install Momo Play Forex Trading Strategy?
- Download Momo Play 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 system
- Right click on your trading chart and hover on “Template”
- Move right to select Momo Play Forex Trading Strategy
- You will see Momo Play 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.
Click here below to download: