Trade Forex Trading

Momentum Trends - Different Type of Market Technical Analysis

What's a Momentum Trend?

A momentum trend is one that has more strength than prior one, it can be plotted using a much steeper trend line than the one that was in play before. When a new line forms that's much steeper than a earlier one we say that the trend has gathered extra strength and becomes much stronger. These types of setups requires a different type of market analysis.

In the example illustration shown below: Also when price is moving upwards within a trading channel, if price breaks the up channel a stronger trend is initiated such as shown & illustrated in the illustration below. If as a trader your chart breaks an up trend line to the up-side in an upwards direction moving market like the one below, Don't Try to Sell, Buy More Contracts, Remember this tip it can help make you a lot of money just like the way it did in trading analysis below.

Channel Break Upwards - More Strength on Trend - Trend Analysis of Parabolic Trends Explained

Channel Break Up - More Strength on the Upward Move

Using the same analysis examples above we can also see how the new steeper trend lines were initiated showing the currency was gaining momentum.

This is displayed and illustrated by the steeper trendlines that can be portrayed as the price progresses.

The newly initiated trend has more momentum than the earlier one just as is displayed and illustrated by the setup formation of the steeper trend-line.

This forms trend B & C just as displayed and illustrated and shown in the diagram below depicted using the MT4 analysis software, The force added a new steeper line as plotted on this chart.

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

Momentum Trends in Forex Trading - Trend Analysis of Parabolic Trends Tutorial

Price Gaining More Strength

However, when the steepest trend-line is broken then even others trendlines will most likely be broken too. It's best to take profit once the steep most trend-line is broken.

This strategy also can be used by short term traders like the day and intra-day trader or scalper trader, this setup will frequently form on the 5 min and 15 minute chart. This parabolic trend lines can be used to know where to set take-profit. One should immediately take his profit as soon as the steep most trend-line is broken.

How Do You Trade These

The momentum trendlines are good analysis tools for determining where to book a profit early before other traders. This momentum setup forms commonly on 1 minute, 5 min & 15 mins charts & henceforth suitable for scalpers and day traders. For intraday trading which is most regular? - the best chart to use is 15 minutes sometimes 5 minute, for example after entering a short term trade transaction either buy/sell and the market moves some pips in your favor and you identify this pattern then it's best to exit once the steepest trendline is broken and take profit at that point.

Technical Analysis Example

For this illustration we shall use short-term chart of minutes for drawing, when the setup appeared as below, it was a good point to takeprofit.

with Momentum Trend-Lines - Momentum and Parabolic Trends

Trading the Momentum Market Moves

In the above example one trading long would have waited until the steepest trendline was broken then closed the trade and booking profit at this place thus making profit of 42 pips on this buy trade. A trader would have exited the trade position at the best time & thus avoiding the choppy range bound market which followed.

Parabolic Trends - What is it?

Sometimes a market moves in a parabolic formation, and this is seen when panic buying sets in and prices is pushed vertically. During a parabolic up move, there is almost complete absence of sellers, which forms a vacuum of buying. When this happens, traders dash to just get in to the market regardless of price, in fear of being left backwards. This move can make the largest price movements in the shortest period of time, traders will put buy orders in this setup.

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

This trend will last for months on end even up to 2 years, for this time period just keep buying & as long as those weekly & monthly trendlines are holding just keep opening buy and buying.

When a stock or currency moves in this manner, the highest point which is reached often symbolizes end of a move with prices not going back to the ultimate highs again for a very long time. When this point is reached & the most steepest trendline is broken it's best to consider that as a price trend reversal and it's best to take time off the market & enjoy your profits for a while before calculating what's your next move.

The same can also happen for a downtrend when there is panic selling and price also is driven vertical. This especially happens during recession.

The steeper a trend-line angle, the less dependable it becomes. When the most steep is broken its best to exit this trade transaction. The example illustration below is for oil that has shaped a parabolic setup. Another exemplification is xauusd that formed on the weekly/monthly chart during the period shortly after the steep most line in the oil trading chart was broken.

Parabolic Trend - Technical Analysis - Momentum and Parabolic Trends

As a trader if you happen-to come across a parabolic trend in an upward direction just keep buying & buying some more and you'll more likely to make profits trading this market trend direction, there will be no added analysis requirement just the trend-lines. The one thing to remember is to exit the trade once the steepest trend line is over because the reversal on this pattern setup formation is very quick you need to also be very fast. Just ensure that you as a trader get out at the correct level just like in the above illustration.

For illustration, the above parabolic movement is of crude oil chart, the FX traders had dominated to drive the price of oil from $70 to $150 over a period of a couple of several months at the top of the market those who call themselves analysts were so bullish that they predicted the price of crude oil would hit a high of $200, what these analysts did not know this concept a.k.a Vacuum buying, in analysis market trading as long as the trendlines held the trend of the market price was upward, but even after the first steepest trendline was broken the analysts kept insisting the price would hit $200, guess what, after the most steepest trend line was broken it didn't even take 2 weeks to take the price of oil, back to $50 at sometime it was even $35. That is parabolic analysis, now you know.

Good examples of this pattern on charts is the week and month price charts for Gold and Crude Oil, these trade charts can be found on MetaTrader 4 software depending on your broker.

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