5-Minute Momentum Trading Strategy
Introduction
I am not a massive fan of short-term trading strategies because it can be hard to overcome the spread.
For example, you like to trade the Forex USD/JPY pair, and your favored broker has a 4-point spread, you need to make 4 points profit to break even.
Nevertheless, I thought I would share a simple forex trading strategy with you that I posted to a previous site that I used to run back in 2014 because it seems to work well just as well today if you wait for the correct set-ups.
Momentum trading works very well because it gets you into a trade when the market moves powerfully upwards or downwards with real momentum. With this strategy, you will look to open a trade when the price breaks up or downwards after a period of indecision.
That’s because you will find that the price will continue moving in the same direction due to the initial momentum of the breakout.
The criteria are as follows:
Three consecutive candles on the 5-minute chart where the body is tiny
strong breakout candle where the body is much larger than the three previous candles
enter position (with the trend) at the closing price of the breakout candle
target price = 1-2 times the body of the breakout candle stop-loss = high or low of the breakout candle
The first point is critical. You need to see at least three consecutive candles where the price has closed close to its opening price because this is telling you that the buyers and sellers are canceling each other out, and the price is getting ready itself up for a breakout.
This 5-minute price chart of the Forex EUR/USD pair taken from my original post back in 2014 shows you four profitable trades from one single day using this 5-minute momentum trading strategy
Introduction
I am not a massive fan of short-term trading strategies because it can be hard to overcome the spread.
For example, you like to trade the Forex USD/JPY pair, and your favored broker has a 4-point spread, you need to make 4 points profit to break even.
Nevertheless, I thought I would share a simple forex trading strategy with you that I posted to a previous site that I used to run back in 2014 because it seems to work well just as well today if you wait for the correct set-ups.
Momentum trading works very well because it gets you into a trade when the market moves powerfully upwards or downwards with real momentum. With this strategy, you will look to open a trade when the price breaks up or downwards after a period of indecision.
That’s because you will find that the price will continue moving in the same direction due to the initial momentum of the breakout.
The criteria are as follows:
Three consecutive candles on the 5-minute chart where the body is tiny
strong breakout candle where the body is much larger than the three previous candles
enter position (with the trend) at the closing price of the breakout candle
target price = 1-2 times the body of the breakout candle stop-loss = high or low of the breakout candle
The first point is critical. You need to see at least three consecutive candles where the price has closed close to its opening price because this is telling you that the buyers and sellers are canceling each other out, and the price is getting ready itself up for a breakout.
This 5-minute price chart of the Forex EUR/USD pair taken from my original post back in 2014 shows you four profitable trades from one single day using this 5-minute momentum trading strategy
