Momentum Strategy & Indicators Discover Momentum Trading Strategies

The momentum strategy always relies on the fact that certain trades will always be on an upwards spiral. You buy when trades are high, and you sell when trades get higher. Momentum strategy and indicators are strange, as they go against traditional core market principles of ‘buy low, sell high’. A great momentum strategy and indicators can be effective if you take enough risk management steps. You have to select the right equities, and secure the right timing.

What is important to consider for the momentum strategy?

Timing is everything. If you open too early, close too late or have timing that’s off a little, it can be disastrous. Get into the trade early, and manage your position well. In the position is where you minimise your losses, and spread your position out well. And, you need to consistently chart your exit point for maximum profit. All of this is simple to do with our CAPEX.com platforms.

• Volatility: The best momentum strategy always will lean on volatility to make the most profit possible. You have to buy trades that are on an upwards trend, and sell them as soon as the trend starts to falter
• Repetition: With your momentum strategy and indicators that come with it, you need to do it over and over. As soon as you sell one trade, you buy another trade that is on an upwards trend. And, you keep going, and keep slowly accumulating more and more profit.
• Understanding: You need to have a thorough knowledge of the momentum strategy and indicators in order to make a sizable profit. You need to know when to enter a position, how long to hold it for and when to exit. You also need to know what trends to jump on; short term trends, news driven spikes in certain trades and selloffs.

1. First of all, activate your moving average lines on your CAPEX.com chart. You can do this in the indicators section of your settings.
2. This is a momentum strategy and indicators that uses two average lines. There’s the slow moving average, that uses a 200 MA. The fast moving average line will use 50 MA.
3. The golden cross is a chart pattern that shows the fast line crosses the slow line in an upward direction. This will indicate a bullish trend. The death cross is a chart pattern that shows the fast line crossing the slow line in a downward direction. This indicates a bearish trend.
4. The strategy with this momentum strategy and indicators is simple. Hold a long position when the golden cross happens, and short the position when the death cross occurs
5. This indicator works well for assets such as cryptocurrency and Forex, where you’re bound to get the golden cross relatively quickly. You can also use a long only strategy, when you only enter a golden cross.

Factors influencing Forex Trading

Important political developments

Tax changes

Consumer & producer preferences – CPI or PPI reports

Interest Rate Decisions - Bank of England MPC Announcements, Fed Interest rate Decisions, etc.

Other market-related FX news

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The golden cross and death cross algorithm isn’t just used for momentum strategy and indicators. But, we at CAPEX.com believe it’s the most useful to use. It’s also used for day trading strategies and in Forex scalping trading to short sell quickly. The reason it’s a great momentum trading strategy is because it relies on there being an upward trend. The algorithm can only work if the fast line and the slow line are constantly moving.

When it comes to a momentum strategy and indicators, you’re bound to get a good, simplified analysis of a trend when using this algorithm. There is also a long only position to use. This position can show far more profit, but it can be far more risky. You’d have to be experienced to analyse where the death cross will happen, and how much profit you could lose.

Opportunities – The advantages of using a momentum strategy and instruments regularly

• Large profits, short times: A great momentum strategy and indicators will benefit short sellers. You make large profits in short periods because you are entering positions constantly when they are on an upward trend, and leaving shortly when they get to their peak. The more you accumulate, the more profit you’ll make.
• Volatility works for you: A momentum strategy and instruments are one of the few trading strategies where volatility is a constant ally. Any time you know a trend has taken an unexpected upturn, you know you can profit off the trade. There will always be volatility in certain markets, like Forex and crypto, so why not maximise your returns with your momentum strategy and indicators on our CAPEX.com platform?
• Analytical: A great momentum strategy and instruments are so formulaic, and to the point. Everything you do is completely analytical. You do your research about a trend, and follow the upward trends. You’re at no risk to make impulsive emotional decisions, because you have your momentum strategy, and you can stick by it.

Risks – The downfalls of over relying on a momentum strategy and indicators

• Timing: Timing is everything when it comes to momentum trading strategies. It could be difficult for a trader to get the timing down perfectly to make profits off a momentum strategy and instruments. You need to exit and enter at the right times, but you also need to use our CAPEX.com platform to predict momentum speed perfectly.
• Cost: Because your momentum strategy and instruments are short, you’ll need more funds in your CAPEX.com account  in order to make a worthwhile profit off the trades. This could mean a higher required investment, because you’ll have more overall trades compared to long term investing.
• Time consuming: When a trader is using a momentum strategy and instruments, it’s very time intensive. You have to analyse the entire market, chart out your plan of attack for entry and exit points, and then be glued to the screen when you are holding the position. It takes a certain kind of person to dedicate that much time and learn that skill properly to pull off this kind of strategy successfully.

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