Triple Exponential Momentum Forex Trading Strategy

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Triple Exponential Momentum Forex Trading Strategy

Moving averages are some of the simplest technical indicators that traders can use. It is basically just an average of historical prices plotted on the price chart.

However, despite its simplicity moving averages are one of the most widely used technical indicators. Almost all traders would use a moving average or any of its variations on their price chart. This is because moving averages are very effective for identifying trend directions and trading with the trend.

One of the most underrated way traders can use the moving average is as a dynamic area of support or resistance. In a trending market condition, traders would often want to trade with the trend. However, the trend would never move constantly in one direction. It would still oscillate up and down, yet it will follow the general direction of the trend. Price would move with the trend, retrace for a bit, then resume the direction of the trend, and repeat the same process again and again.

It is in the best interest of a trader to trade with the trend yet look for entries during pullbacks or retracements. The question is, where should they expect a pullback? Moving averages or the area between two moving averages are a great way to look for one. Price would usually retrace back to the mathematical average of price before resuming the direction of the trend. This causes price to bounce from the area of the moving average lines, which makes it a dynamic area of support or resistance.

Triple Exponential Momentum Forex Trading Strategy is a strategy that is based on this concept. However, instead of trading in an established trending market, this strategy attempts to trade on the first retracement of the new trend.

TEMA Custom

TEMA Custom is a modified moving average indicator based on the Exponential Moving Average (EMA). TEMA simply means Triple Exponential Moving Average.

TEMA Custom was developed in order to provide traders with a custom moving average line that is smoothened in order to lessen its susceptibility to market noise. It does this by averaging out multiple EMA lines and decreasing the lag out of these moving average lines.

The result is a moving average line that is smoother and less susceptible to market noise false signals, yet at the same time is very responsive to price action, which is an inherent characteristic of the Exponential Moving Average.

Awesome Oscillator

The Awesome Oscillator (AO) is a trend following technical indicator which helps traders identify the general direction of the trend.

The AO is basically an oscillator based on the difference between modified moving averages. In fact, the AO simply the difference between the 5-period Simple Moving Average (SMA) and the 34-period Simple Moving Average (SMA). However, instead of using the close of the period as a basis for the SMA lines, AO uses the midpoint of each bar as the basis for the SMA lines. In a way, the AO is an oscillator version of the classic moving average crossover.

The AO can be used to identify trend direction bias and trend momentum. Positive histogram bars indicate a bullish trend bias while negative bars indicate a bearish trend bias.

The color of the bars also changes depending on the strength of the trend. Positive green bars indicate a strengthening bullish trend, while positive red bars indicate weakening bullish trend. On the other hand, negative red bars indicate a strengthening bearish trend, while negative green bars indicate a weakening bearish trend.

Traders can use the AO as a trend direction filter. This means traders can use it to avoid taking trades that are not aligned with the current trend direction.

It can also be used as a trend reversal or momentum entry trigger. Traders can either use the shifting of the bars from positive to negative as a trade signal, or they can also enter trades as the color of the bars change indicating the direction of the trend.

Trading Strategy

This trading strategy is a trend reversal strategy that trades on the crossover of the TEMA Custom line and the 14-period Exponential Moving Average (EMA) line. However, instead of trading on the actual crossover of the two lines, traders should wait for price to retrace towards the area between the two lines and reject the area. This would confirm that price action is respecting the moving average lines as a dynamic area of support or resistance for the newly established trend.

The Awesome Oscillator is used to confirm the new trend and the direction of the momentum. Traders should only take buy trade setups whenever there is a positive green bar on the AO and sell trade setups only when the AO has a negative red bar.

Indicators:

  • Tema_custom
    • MA Period: 16
  • Exponential Moving Average
    • Period: 14
  • Awesome

Preferred Time Frames: 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

  • The TEMA Custom line should cross above the 14 EMA line.
  • Price should retrace and reject the area between the TEMA Custom and 14 EMA lines.
  • The AO bar should be positive green.
  • Enter a buy order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on the support below the entry candle.

Exit

  • Close the trade as soon as the TEMA line crosses below the 14 EMA line.

Triple Exponential Momentum Forex Trading Strategy

Triple Exponential Momentum Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The TEMA Custom line should cross below the 14 EMA line.
  • Price should retrace and reject the area between the TEMA Custom and 14 EMA lines.
  • The AO bar should be negative red.
  • Enter a sell order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on the resistance above the entry candle.

Exit

  • Close the trade as soon as the TEMA line crosses above the 14 EMA line.

Triple Exponential Momentum Forex Trading Strategy 3

Triple Exponential Momentum Forex Trading Strategy 4

Conclusion

This trading strategy works very well because it trades on the retracement and rejection on the TEMA Custom and 14 EMA lines. This serves as a confirmation of the dynamic area of support and resistance as well as a confirmation of price action based on the swing points.

The crucial skill that traders should develop when trading this strategy is in identifying plausible pullbacks or retracements as well as the rejection of the area between the two lines based on price action. Traders who can master this skill can profit from the forex market using this strategy.


Forex Trading Strategies Installation Instructions

Triple Exponential Momentum 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.

Triple Exponential Momentum 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 Triple Exponential Momentum Forex Trading Strategy?

  • Download Triple Exponential Momentum 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 Triple Exponential Momentum Forex Trading Strategy
  • You will see Triple Exponential Momentum 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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