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Items Tagged With momentum

Learn:Forex Exclusive Guest Idea
Written By: Rich
2006-04-07 00:35:43

EUR/CAD – April 6th, 2006

 

Our attention is looking away from the USD based pairs with the NFP report due out Friday.

 

Notice the EUR/CAD has been on a month long uptrend with one correction. We feel it is due for another minor correction. Why? There are a few things pointing in this direction. First, the candle pattern (a shooting star). Second, notice the high of the wick yesterday attempted to test the .618 fib. Fourth, the resistance in this area. And finally look at the momentum indicator at the bottom…divergence is forming.

 

lforex-chart-04-06-2006

 

 

 

 



Weekend Reading - Keeping an eye on Momentum
Written By: Rich
2006-02-19 15:14:28

Keep An Eye On Momentum

http://www.investopedia.com/articles/forex/05/MomentumMACD.asp

This article states the obvious yet brings up a simple setup that I never thought about.  The basic premise is that momentum precedes price.  Any momentum indicator can be used but this article uses MACD as an example.

1.    Define a MACD segment.  Segment #1 below.

MACD momentum segment setup 

 

 

 

2.    Measure the highest bar of segment #1.  In the above case, the highest bar was .004.

3.    Wait until the next segment forms; segment #2 above.  If a bar from segment #2 falls below -.004, downward momentum has exceeded previous upward momentum.
Segment #2 consists of 10 bars.  The values are in order from left to right (-.001, -.004, -.006, -.007, -.008, -.008, -.008, -.006, -.002, -.0008)

The third bar from the left is -.006, showing greater momentum than during anytime in segment #1. Sell at the close of this bar (price=1.7579.)  Exit the position at your discretion but a good time to do so might be when momentum slows.  Momentum stalls 2 consecutive bars at bar #7.  MACD value is -.008.  Exit at the close of this bar (price=1.7381)

The profit is close to 200 pips.  Like every other setup, this will not always be successful and should be used in conjunction with other confirmation tools. 

What I like most about this setup is its simplicity.



Momentum Divergence in the EUR/JPY
Written By: Rich
2006-04-18 12:01:41

An observation from Learn::Forex that may pique your interest.

Euro/JPY has our attention…

Why? 

Notice on a Daily chart we are attempting to push up into the zone of 145.00 although the momentum is clearly beginning to fall off. This is again confirmed with the 120 minute chart as well. This combine with the resistance area we are looking for a short opportunity anywhere from current price up to a retest of the 144.80/145.00 zone. Targets on the short side are 143.00 and if we get a clear break of 143.00 we could have a second target of 142.00. We would look to place a stop up above the 145.00 level.

lforex-chart1-04-18-2006

  

 

 

 

lforex-chart2-04-18-2006

 

 

 

 



Learn:Forex Exclusive Analysis
Written By: Rich
2006-04-12 14:14:45

Learn::Forex provides exclusive content for members of FXCM.  I find that out of all Guest Trading Ideas they have "keeping it simple" analysis that you have to respect.  Others have analysis that from day to day is not consistent and analysis that also can be contrued as more of an art.  (easily interpreted differently from 1 person to another)

Here is Learn::Forex's Analysis today.  See for yourself.

AUD/JPY April 12th, 2006

The pairing that has caught our attention this week is the AUD/JPY.

First lets take a look at the Daily. Two things that stand out.First, notice that we have TWO different fib pulls that are coming together and have for resistance. And second, look at the momentum.it is appearing to weaken.

Then on the 240 minute chart we find confirmation of the price action losing momentum and we also get a nice trend line to use. In SHORT there seems to be an opportunity here.anywhere from current market price all the way back to re-test the trend line and resistance zone of 87.00

We have some support at the 85.50 area with more major support coming in at 85.00 which also happens to line up with a .382 retracement fib. 

lforex-chart1-04-12-2006

 

 

 

 

lforex-chart2-04-12-2006

 

 

 

 



Different Kind of Game
Written By: Rich
2006-10-17 14:03:40

It's just unbelievable how the tidbits of information out there on the internet can sometimes be so useful.  I was reading Lloyd's blog and his short post today really was insightful.  He stated that this is a "fundamental" week due to the plethora of economic releases.  Because of this, he believes that the trading environment created is beneficial to both position traders and scalpers.  He is not good at following trends or scalping and is mainly a momentum trader who likes to trade the short-term breakout.  

Maybe I find this so insightful because this is exactly the type of trader I am.   I think reading this just threw this fact into my face.  I feel pretty lost when the markets are in a trending environment.  I have no idea when to get on and when I do get on, I usually get caught in the minor retrace and stopped out.  This happened to me this morning.  

http://tradingforaliving-assess.blogspot.com 



May 2nd NY Session #2
Written By: Rich
2006-05-02 10:27:17

Funny how I was able to squeeze out a 11 pip profit on a trade that was absolutely discretionary.  I was watching the GBP/USD and it was highly overvalued on the short-term charts with solid resistance at 1.8400.  Even though the pair had reached a new high today, the MACD histogram failed to reach new highs (negative divergence on the 5 minute, not shown below).  The I shorted the pair at 1.8380 with a stop 30 pips above at 1.8410.  Once the pair ran up 15 pips, I set my stop to breakeven.  It ran up as high as 26 pips but started losing momentum.  I was watching for an exit on the 5 minute charts and once I noticed momentum and inertia decreasing, I exited.

15 minute chart below: 

May 2nd GBP/USD Trade

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Free Raghee Horner Webinars This Weekend
Written By: Rich
2006-04-24 13:51:16

Raghee Horner announced today that she will have 2 webinars this weekend.  The first is called "Setting Up Your Entries with Advanced GET Charts."  This webinar allows you to watch as Raghee walks you through the three type of entries she uses. The second is "Master Order Execution with Raghee Horner" with a description as follows:

Raghee will share her entry techniques using eSignal's Advanced GET charts
which attendees of this FREE WEBINAR can get free through TradeDirectFX*.
Advanced GET charts will allow you to set up the Wave, draw trendlines, support,
and resistance as well as use all the Fibonacci retracement and extension levels she uses every day.  See set ups of momentum trades, swing trades, as well as Raghee's Wave/CCI trade and learn specifically when to use each.

Both webinars are this Saturday, the first at 1 p.m. EST and the second at 4 p.m. EST and are FREE. I've been to her previous 4 webinars and found them all very beneficial if not for her commentary also for the contacts you meet in the room.  

I've already registered for these 2 events.  I would recommend you do the same.

Click Read More to see the attached email with register details. 


Read More About Free Raghee Horner Webinars This Weekend...


Eliminating Five Basic Mistakes
Written By: Rich
2006-04-08 10:45:20

There was a webinar titled, "Eliminating Five Basic Mistakes from your Analysis" this week presented by Ian Copsey.  I found this webinar and the corresponding Powerpoint presentation very useful because I have been guilty of these mistakes.  Before I summarize and attach the powerpoint presentation (I also converted it to PDF), who is Ian Copsey??

According to the moderator, Ian Copsey is one of the foremost FX technical analysts in the world, with over 20 years experience in financial markets. He began his career in Barclays Bank’s FX trading room in 1982 then moved to head their FX sales desk in Hong Kong in 1988 where he spent almost 5 years.

Either way the guy has got experience and that's what counts.  

So what are the 5 basic mistakes and also the verdict of whether I'm guilty or not of making such a mistake? 

  1. Trend Line Drawing Mistakes  Verdict: GUILTY
    • Use 3 touch guideline.  By waiting for 3 touches, the trendline becomes stronger and more reliable 
  2. Double Tops and Double Bottoms  Verdict: GUILTY
    • WAIT FOR CONFIRMATION which comes on break of peak or trough
  3. Head and Shoulders  Verdict: GUILTY
    • Wait for Completion of pattern
  4. Momentum Indicators  Verdict: mistrial
    • Momentum studies are not meant to be used in trending markets
    • Use ADX/DMI to determine trend then use 2 other methods to determine better trading opportunities
      1. More sensitive version of RSI
      2. Breaks of momentum trend lines
    • After a trend, when should momentum indicators be used?
      • When there is a divergence
        • a divergence is not a reversal signal and trades should not be based on the fact the divergence has occurred.  Look for other signals such as:
          1. A break of trend line
          2. break of a pattern
          3. break of sequence of high and lows
  5. Confirm your analysis  Verdict: GUILTY
    • What kind of complementary techniques are available?
      1. momentum - used in consolidation and divergence after trends
      2. trend line breaks
      3. fibonacci projections from elliott wave
      4. pattern breaks
      5. time cycles

The PDF or powerpoint presentation is really worth the quick 15 minute read.

pdf eliminating 5 common trading mistakes 08/04/2006,11:23 952.99 Kb

pps Eliminating Five Basic Mistakes 08/04/2006,11:31 1.17 Mb


Week 5 Performance
Written By: Rich
2006-01-06 11:54:46

This week was my most profitable since I started "the project" 5 weeks ago.  I profited 289 pips for a total of $2450.  This was a 22% increase of capital. 

By week, here are my profit % of balance:

week 1    +6.5%
week 2    +7.0%
week 3    -0.5%
week 4    -2.0%
week 5    +22.0% 

I made a lot of my trades this week using the 30, 60 and 240 minute charts of 5 currency pairs: EUR/USD, USD/JPY, USD/CHF, GBP/USD, and GBP/JPY.

I relied on making trades near or at support or resistance mostly using CCI, RSI, and momentum as confirmation along with a couple of other indicators.  I don't know if you would call this a trading system but nevertheless, this has worked for me over the weeks.

1.   Identify support/resistance on 240 minute or daily chart
2.   Draw upper/lower trendlines on RSI and CCI indicators of 30/60/240 minute charts.  
3.   If bounce off CCI trendline, take the trade direction of bounce
4.   Confirm furthur with RSI and momentum
5.   Place stop (1 pip + pip spread) above resistance.  If the stop is at a round number move the stop another pip; same process for support
6.   Use fibonacci or 8/21/50/100/200 EMA's to set target price for exit

This method is nothing new or exciting.  I'm applying very common principles here.

I hope everyone had a great trading week.  Let's do it again on Monday.  Have a good weekend. 



My Trading Plan
Written By: Rich
2006-03-11 20:03:39

The primary reason why I started the Forex Project is to determine if trading as a career is a viable option. Before doing this, I followed the financial markets because I found it interesting and also necessary since my job as a IT professional on Wall Street required at least some knowledge of it. Most of my investments were in mutual funds and I dabbled in the equity markets here and there. I was reading the Wall Street Journal one morning and happened to stumble upon an article about a Forex Day Trader. I wrote about this experience a while back and will include it here.

This summer I was browsing the Wall Street Journal when a headline caught my eye. I don't remember it exactly but it stated, "Disc Jockey Plays the Hits by day, Trades Forex by Night." It turns out that this DJ worked for WDHA, a radio station down the road from my current job. I continued to read how he was a "Forex Moonlighter" and was going to eventually trade full-time. This DJ stated that he made $170,000 trading last year and this year he was planning on making more. It went on to say that he did this all in the comfort of his own house on the internet. It also stressed the difficulty with being successful doing so.

Either way, this got my attention. A couple of hours later I went to the Barnes and Noble and tried to find any book on Forex I could. That book turned out to be James Dicks, "Forex Made Easy: 6 Ways to Trade the Dollar". It turns out that this book was nothing more than a glorified sales pitch. He kept mentioning his "4X Made Easy" software. Either way, it started me on my way so for that I'm grateful.

Working in corporate America for the last 8 years or so have opened my eyes to the ways of the world. The chief concern of most corporations are how they can increase profits for shareholders. They won't hesitate to outsource jobs overseas if it's going to decrease expenses. One day, they may feel the need to send my job overseas. I understand that it's just business but I have to think about myself and my family. I don't want to have to rely on another to provide for me. I feel like trading can provide me with this financial independence and freedom.

This isn't the only reason why I'm trading. In addition, I enjoy statistics and charts and find trading an overall enjoyable experience. The appeal of trading from anywhere and from home is also a reason why I'm trading.


I will be trading the Foreign Exchange market only. Specifically I will be looking to trade the EUR/USD currency pair only until I can develop a consistent trading strategy. Once I become more comfortable trading the EUR/USD, I will slowly integrate more currency pairs into the mix. I will allocate 100% of my fund to trading forex.

This year, I want to look further at trading the following:

· Mini-sized Dow (YM)

· E-mini S&P (ES)

· E-mini Nasdaq (NQ)

· E-mini Russell (ER)

· Soybeans (S)

· Mini-sized gold (YG)

· Corn (C)

· Wheat (W)

· Crude Oil (CL)

· Mini Crude Oil (QM)



Withdraw 100 percent of any trading profits at the end of each month and place in a money market account with +4.0% interest

Since I will only be trading the foreign exchange market, all monies will be allocated to Forex only. I will trade between 1 and 3 lots per trade. I’m not sure if I will stick with the following plan but I may try it:

3 lot trades are reserved for trending markets and when the trade is in the direction of the trend. 1-2 lot trades will be reserved for momentum trades in non-trending markets


I cannot classify my trades as swing trades or day trades because my entry/exit will not be based on time. I may or may not exit a trade the same day I entered it.

I will have 2 types of trades, swing trades and momentum trades. Swing trade set ups require an established trend while momentum set ups are best set up when there is no prevailing trend.

1. The Squeeze

I will use the Squeeze on any time frame I’m watching which most likely will be the 60-minute, 240-minute, and Daily.

Trading Rules

i) Look for a red dot on the Squeeze Indicator which will indicate a “heads up” that a trade signal is setting up. This indicates that the Bollinger Bands are trading inside of the Keltner Channel

ii) The signal is the first blue dot after the series of red dots. This indicates that the Bollinger Bands have made their way outside of the Keltner Channel

iii) Once this blue dot appears, I will look at the momentum histogram in the Squeeze indicator for trade direction. If momentum is above 0 and increasing up, I will go long. If momentum is below 0 and decreasing down, I will go short

iv) If the interval of the chart is 60-minute or 240-minute, set a 20 pip stop. Set a 100 pip stop if the squeeze play is on the Daily chart

v) Scale out of 1 contract once a 10 pip profit has been reached. Move the stop to breakeven minus 10 for the remaining contracts

vi) Use the momentum histogram to exit the remaining contracts. Once momentum starts to fade, which is indicated by a failure to make consecutive higher highs if long or lower lows if short. Wait for 2 consecutive higher/lower bars before exiting at the market on the remaining contracts

2. RSI 24

I will use this setup on the 30-minute only

Buy Trading Rules

i) Buy long when 24 period RSI crosses above 30

ii) Exit position when 24 period RSI crosses below 70

Sell Trading Rules

i) Sell short when 24 period RSI crosses below 70

ii) Exit position when 24 period RSI crosses above 30






There are 13 items tagged with momentum. You can view all our tags in the Tag Cloud

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