Different Type of Market Technical Analysis

What's a Momentum Trend?

A momentum trend is one which has more momentum than the earlier one, it can be depicted using a more steeper trend line than the one that was in place before. When a new line forms that is more steeper than a previous one we say that the trend has gathered extra strength & becomes much stronger. These types of trading set-ups requires a different type of analysis.

In the example shown below: Also when the price is moving up within a channel, if it breaks the upward channel a stronger trend is shaped as illustrated in the illustration below. If as a trader your chart breaks an up trendline to the upside in an upward direction moving market like the one below, Do not Try to Sell, Buy More Contracts, Remember this xauusd tip it can make you a lot of money like the way it did in analysis below.

Channel Break Up - More Strength on Up Movement

Using same technical analysis examples above we can also see how new steeper trendlines were shaped showing the trend was gathering strength.

This is shown by the steeper trendlines that can be portrayed as the trading price progresses.

The newly shaped trend has more strength than the previous one as shown by the forming of the steeper trend line.

This forms trend B & C as shown in the diagram below drawn using the MetaTrader 4 analysis software, The momentum added a new steeper line as plotted on this chart.

This is shown in the example shown below by the three lines A, B and C showing formation of stronger trends as the market continues to gain momentum.

Price Gathering More Momentum

However, when the steepest trend line is broken then even all the others trend lines will most likely be broken too. It is best to take profit once the steep most trendline is broken.

This strategy can also be used by short-term traders like the day trader or the scalper, this pattern will oftenly form on the 5 minute & 15 minute chart. This parabolic trend lines can be used to know where to take profit. A trader should immediately book his profit as soon as the steepest trendline is broken.

How to Trade These

The momentum trend lines are good analysis tools for determining where to take profit early before other traders. This momentum trading pattern occurs frequently on 1 min, 5 min and 15 mins charts & therefore suitable for scalpers & day traders. For day trading which is most common? - the best chart to use is 15 mins sometimes 5 mins, for example after opening a short-term trade position either buy/sell and the market moves some pips in your favor & you spot this setup then it is best to exit once the steep most trend line is broken & take profit at that point.

Technical Analysis Example

For this example we shall use short term chart of minutes for plotting, when the set-up appeared as below, it was a good point to take the profit.

Trading the Momentum Market Moves

In the above example a trader trading long would have waited until the steep most trend line was broken then closed the trade & taking profit at this place thus making profit of 42 pips on this buy trade. One would have exited the trade position at the best time & thus avoiding the ranging market that followed.

What's it?

Sometimes a market moves in a parabolic manner, & this is seen when panic buying sets in and trading prices is driven vertical. During a parabolic up move, there is almost a complete absence of bears, which initiates a vacuum of buying. When this occurs traders scramble to just get into the market regardless of trading price, in the fear of being left behind. This can make the biggest trading price movements in the shortest amount of time, traders will set buy trade orders in this setup.

For this type of move it's best to keep buying - no need for analysis just keep buying.

This trend will last for months on end even up to two years, for this time just keep opening buy and as long as those week & monthly trend lines are holding just keep buying & buying.

When a xauusd moves in this way, the highest level that is attained often marks the end of a move with trading prices not returning to the ultimate peaks again for a long time. When this level is reached & the most steepest trendline is broken it is best to consider that as a trend reversal and it's best to take time off the market & enjoy your trading profits for sometime before calculating your next move.

The same can also happen for a down trend when there is panic selling and price is also pushed vertically. This especially happens during recession.

The steeper a trendline angle, the less reliable it becomes. When the most steep is broken its best to get out of this trade position. The example shown below is for crude oil that has initiated a parabolic pattern. Another example is gold that formed on the weekly/monthly chart during the period shortly after the steepest line in the crude oil chart was broken.

As a trader if you come across a parabolic xauusd trend in an up direction just keep buying & buying some more & you will more likely to make profits trading this direction, there will be no added analysis required just the trendlines. The only thing to remember is to get out once the steepest line is over because the reversal on this setup is very fast you need to also be very fast. Just make sure you get out at the correct spot just like in the above example.