Momentum makes you money Easily

Once you’ve established the dominant trend, you need to ‘refine’ your entry level by entering

the market at ‘peak momentum’.

Momentum is the ‘speed’ of price movement in one direction. The greater the momentum, the

higher the probability of a continuation in the same direction.

This strategy uses two moving averages to identify short-term momentum – the 8 and 21 day

exponential moving averages (EMAs).

EMA’s are more responsive to the most recent price action therefore give a better indication of

current price momentum.

When the 8 day EMA crosses above the 21 day EMA, momentum is bullish. This means that the

odds of further price rises are tipped in your favour and if the dominant market trend is up

(bullish) you should enter a long position.

Close your position when the price closes below the 21 day EMA.

Example pic:

Faraday

Research

7:

By contrast, when the 8 day EMA crosses below the 21 day EMA, momentum is turning bearish.

This means that the odds of further price rises are tipped in your favour and if the dominant

market trend is down (bearish) you should enter a short position.

Close your position when the price closes above the 21 day EMA.

Example pic:

Strategy Summary:

BUY

when the 8 day EMA crosses above the 21 day EMA and the ‘dominant’ trend is bullish.

SELL

when the 8 day EMA crosses below the 21 day EMA and the ‘dominant’ trend is bearish.

This basic trading strategy illustrates the importance of trading in line with the dominant trend

and current momentum.

Trade entry and exit levels can be optimised by using powerful price patterns and additional

technical indicators but this falls outside the scope of this guide.