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Welcome
Hello and thank you for purchasing Momentum Power Strategy. Here's just a quick hello, and then Im getting straight to the strategy. So lets get to it
A Few Notes
A few little things I want to mention before we start going through the actual strategy
Money Management
If youve got a profitable trading strategy, then as long as youre not irresponsible with your risk, money management is very simple. In fact, money management is very simple...it just requires a little common sense and doing what successful traders do. What do successful traders risk per trade? Its pretty much in the one to three percent area. Risk that amount of your capital per trade and you wont have any sleepless nights.
Give It Time
Im hoping that, because youve been intelligent enough to buy this Forex strategy (and not the other questionable ones that promise you riches overnight with only the click of a button) you are also going to be intelligent enough to give it a chance by trading with it in real time and with real money. I urge you: once youve finished going through this eBook, open your charting package and look back through your charts with this strategy.
Only then will you realize that I have not cherry-picked the trade examples in this eBook; the trades that I go through happen every few days but some trades are better than others.
System Briefing
What Do We Trade?
You can trade all the pairs you want. It is possible to trade other instruments such as futures and stock, but there are some tweaks that would have to be made to the strategy, so we shall not cover these here we will stick to Forex only.
When to Trade
You can trade with this strategy 24 hours/5 days a week.
Strategies
The Strategy
Simple: look for technical divergences, where the price goes one direction and the technical indicators go the opposite direction. Most of the time you can see a technical divergence before the trend is about to change direction.
Trade
OK How do we trade?
We are looking for momentum divergence on price action. When we find Higher High & Higher Higher High on the chart and at the same time we see a Higher High & Lower Higher High on the momentum, it means we should be prepared to go short. When we find Lower Low & Lower Lower Low on the chart and at the same time we see a Lower Low & Higher Lower Low on the momentum, it means we should be prepared to go long.
Example #1
Example #2
Example #1
Example #2
Money Management
Where to Set the SL
If we go long, we set the SL 5 pips below the previous lowest low. If we go short, we set the SL 5 pips above the previous highest high.
Example #1
Now let see how we set the TP: We draw Fibo line from lower low to the higher high (see red dotted arrows) and we will get 3 targets at 161.8, 261.8 and 423.6
Example #2
Example #3
As you can see, we found divergence and we draw a line need the lowest low, now we will take a look at the weekly and monthly chart and find out if that line is a support or resistant level.
And as you can see, that line is a support and resistant level, so it's a good trade for us.
At the example above you can see that we set the SL on the last Momentum's higher low, so if the Momentum breaks the purple line, we exit the trade with a loss. This approach can cause a bigger loss but in most cases it will keep you out of losses from movements after announcements when the market's volatility is big. We can't really recommend on that approach because it's depends on your trading style but give it a try and you'll see it works very well.
Adding Confirmation
Another way to increase your winning rate is to add a second indicator just to confirm the divergence before you enter the trade. For that reason, we will use the RSI(7).
You can see at the example above that we find divergence between the Momentum and the price but there was no divergence between the RSI and the price so it's a no go. So this trade really didn't work out that well, it did made some profit but it didn't rich the TP. So you could use the RSI as a filter to spot good trades and to filter out bad trades.
That's It!
Wash, Rinse & Repeat
I hope you now see that if you follow these simple instructions carefully, then you can reap many profits. Just remember, it takes practice, patience, persistence...and wise choices!