Momentum Strategy – Forex Trading Strategies

Momentum Strategy – Forex Trading Strategies

Momentum Strategy – Forex Trading Strategies

There are many trading strategies that have proved their worth in Forex Trading and have already made some successes. However, most of the strategies are difficult to understand and comprehend and require immense effort in research. This is why one of the most successful trading strategies is presented, namely the Momentum Strategy – Forex Trading Strategies. This is easy for beginners to trade with Forex values ​​and requires relatively little effort in their application.

Momentum Strategy – Forex Trading Strategies: The Justification of the Momentum Strategy

The well-known and widespread momentum strategy is also referred to as the theory of relative strength. This was coined and continued by Robert Levy. Levy’s theory states that stocks of an index are arranged within a ranking according to a fixed principle. The course development during the last six months or the last 26 weeks is decisive for a valuation. The theory has long been used mainly for the purchase of shares. This is based on a certain calculation method for the trading of shares. It can also be used successfully in the Forex trade.

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Momentum Strategy – Forex Trading Strategies: When trading Forex values

The momentum strategy – Forex trading strategies follows the generally known principle “The trend is your friend”. One would translate this expression into German, for example, that Forex values ​​that have brought in profits in the past will also be profitable in the future. The momentum strategy can be applied above all when the market is in an upward or downward trend. This strategy is less suitable if the course of the course is in a lateral movement. This is the case when neither an upward nor a downward movement takes place. The momentum strategy will not result in any appreciable success.


Momentum Strategy – Forex Trading Strategies: the right application

In the pursuit of the momentum strategy in the Forex trading are mainly the Forex values ​​bought, which are probably just before a rise or descent. The respective trading values ​​are selected according to the momentum from the multiplicity of the Forex values. The momentum is an indicator of when the price dynamics of a value are likely to accelerate or fall sharply. This is calculated from the division which the current price had against that before the beginning of the period, which is referred to as X here. As a result, a curve can be drawn. This is the momentum curve, the more pronounced the higher the value X is selected.

Momentum Strategy – Forex Trading Strategies: the Calculation Method

Advanced analysts who have been trading with Forex for a long time are assuming a value of 20 for point X. The momentum curve is analyzed in the same way as a chart. As in the case of chart analysis, the points in the lower area of ​​the chart are considered as buying signals. Turnover points, which are located above the curve, are referred to as sales signals. However, this method alone can not lead to a complete assessment of the course of the course. Experienced traders add further methods to the analysis to arrive at a decision to buy or sell a value. For example, current news is of crucial importance because, in a crisis situation, other unpredictable things can predict a sudden break-in or outbreak. Likewise, the value itself should be stable and not constantly subjected to violent fluctuations.


Momentum Strategy – Forex Trading Strategies: Optimal Positioning of Stop Loss Brands

If the investor has selected his trading value after thorough review, a purchase or sale order may be issued. The stop loss mark is set below the incoming price as prices rise, for example to the value of the previous day. In the case of falling prices, the mark is set above the cost price. Once the stop loss mark is reached, the stop loss order triggers the sale of the value, thus limiting losses. If the price increases or falls as expected, the stop loss mark can be adjusted. Thus, ‘profits can be run’ until the time the stop is reached and the end of the winning phase is shown.

Momentum Strategy – Forex trading strategies: even in weak phases successful

The momentum strategy has also proved its worth in weak phases. For even then values ​​can be found which have a certain strength and conceal good chances of profit. This strategy can also be applied with some continuity. According to a number of investigations, this method allows for above-average profits. The momentum strategy is, however, more appropriate for traders who are already experienced in dealing with Forex values, as they can better assess the market. In addition, their use requires a certain amount of time, since a continuous review of the course of the course is necessary since the stop loss mark has to be adjusted continuously.


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