Momentum Wave signal trade (26/6/07) JPY +38 pips

December 27th, 2007 expert Posted in FOREX TRADING STRATEGIES and CONCEPTS, FOREX TRADING ENTRY STRATEGIES |

ONLINE TRADING CONCEPTS:   Momentum signals,   Trading markets,   Waves

Yesterday was a particularly lacklustre day with the JPY showing with only signs of life.

Momentum indicators can give reasonable signals in a sideways market. There are however a few principles to bear in mind when putting on a trade based on momentum signals. Here are a few:
1. NEVER trade momentum signals in a trending market (When the price is making new highs or new lows), NEVER.
2. Although not commonly known momentum tends to measure trading waves and we have found that there tends to be 2 major down waves and the 2 major up waves and so on (Sorry about that Mr Elliott). The waves must move through the momentum Buy/Sell line to be valid. 2 waves in the either the sell or the buy zone don’t count.
3. Trendline violations after the 2 wave are reasonably good trading signals.

Yesterday a momentum trading opportunity presented itself on the JPY (Also on the EURJPY and GBPJPY). The price was between a recent high and a recent low (confirmation of a sideways market), there was a trendline violation on the momentum indicator after 2 fair sized waves.

This was further supported by some other signals which we will discuss in future daily trade reviews. We put on a sell on confirmation of the signal (You have to wait for the candle to close), a stop at the last high and our initial target was the last major low at 122.80. As the deal progressed we exited on the next momentum buy signal (a trendline violation after 2 waves with the price still being between a recent high and low).

Gain 38pips $30,  Risk 12pips $ 10 Return on risk +300% (Time Taken 7 hours)

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