To engage in momentum tradingyou must have the mental focus to remain steadfast when things are going your way and to wait when targets are yet to be reached. Momentum trading requires a massive display of discipline, a rare personality attribute that makes short-term momentum trading one of the more difficult means of making a profit.

Let's look at a few techniques that can aid in establishing a personal system for success in momentum trading. Techniques for Entry The impulse system, a system designed by Dr. Alexander Elder for identifying appropriate entry points for trading on momentum, uses one indicator to measure market inertia and another to measure market momentum. To identify market inertia, you can use an exponential moving average EMA for finding uptrends and downtrends.

When EMA rises, the inertia favors the bullsand when EMA falls, inertia favors the bears.

To measure market momentum, the trader uses the moving-average-convergence-divergence MACD histogramwhich is an oscillator displaying a slope reflecting the changes of power among bulls and bears. When the slope of the MACD histogram rises, the bulls are becoming stronger.

When it falls, the bears are gaining strength. The system issues an entry signal when both the inertia and momentum indicators move in the same direction, and an exit signal is issued when these two indicators diverge.

If signals from both the EMA and the MACD histogram point in the same direction, both inertia and momentum are working together toward clear uptrends or downtrends. When both the EMA and the MACD histogram are rising, the bulls have control of the trend, and the uptrend is accelerating. When both the EMA and MACD histogram fall, the bears are in control and the downtrend is paramount. Refining Entry Points The above principles for determining market inertia and momentum are used to identify entry points in a precise style of trading.

If your period of comfort corresponds to the daily charts, then you should analyze the weekly chart to determine the relative bullishness or bearishness of the market. To determine the market's longer-term trend, you can use the week EMA and the weekly MACD histogram on the weekly chart. Once the long-term trend is gleaned, use your usual daily chart and look for trades only in the direction of the long-term weekly trend.

Using a day EMA and a MACD histogram, you can wait for the appropriate signal from your daily comfort zone. When the weekly trend is up, wait for both the day EMA and MACD histogram to turn up. At this time, a strong buy signal is issued and you should enter a long position and stay with it until the buy cad usd exchange rate forecast 2016 disappears. By contrast, when the weekly trend is down, wait for the daily charts to show both the day EMA and MACD histogram turning down.

Such an occurrence will be a strong signal current currency rate pakistan rupee go short, but you should remain ready to cover the short position at the very moment that your buy signal disappears.

Techniques for Exiting Positions The major reason momentum trading can be successful in both choppy markets and markets with a strong trend is that we are searching not for long-term momentum but for short-term momentum. All markets trend within any given week, and the best stocks to trade are those that regularly exhibit strong intra-day trends.

With that in mind, you must remember to step off the momentum train momentum options trading reviews it reaches the station. As already mentioned, once you have identified and entered into a strong momentum trading opportunity when daily EMA and MACD histogram are both risingyou should exit your position at the very moment either indicator turns down.

The daily MACD histogram is usually but not always the first to turn, as the upside momentum begins to weaken. This turn, however, might not be a true sell signal but a result of the removal of the buy signal, which, for the impulse system, is enough impetus for you to sell. When the weekly trend is down and the daily EMA and MACD histogram fall while you are in a short position, you should cover your shorts as soon as either of the indicators stops issuing a sell signal, when the downward momentum has ceased the most rapid portion of its descent.

Your time to sell is before the trend reaches its absolute bottom.

As contrasted with a carefully chosen entry pointthe exit points require quick actions at the precise moment that your identified trend appears to be nearing its end. The Bottom Line As you have probably already noticed, the impulse system of trading on momentum is not a computerized or mechanical process.

This is why human discipline continues to 5 minute binary options play account trading strategy so much sway on your degree of success in momentum trading: Moving Average Explosions and A Look At Exit Strategies.

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Momentum Trading With Discipline By Jason Van Bergen Share. Currency traders can use this method to avoid stop-order triggers before the real reversal. Learn about market wave, the second screen in this three-part system. Learn how this momentum indicator is used to determine price action on a stock. Two indicators are usually better than one.

Find out how this pairing can enhance your trading. Choosing the right indicators can be a daunting task for novice traders. Pay attention to how the exhaustion principle helps technical indicators signal trend reversals when abrupt value changes coincide with high trading volume.

Learn this simple momentum strategy and its profit protecting exit rules.

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