5 Minute Momo Trade

Hello,

I found a very easy and promising strategy, called "The 5 Minute Forex Momo Trade". It is similar to the one I am using right now.

It is only using Macd and 1 Moving Average.

I use 3 moving averages, 5, 10, 20 and macd, 5 min chart, EUR/USD, USD/CHF, AUD/USD and GBP/USD

Before I start to explain in my (not so good english) I like to ask you to have a look on the following link and to come back to get your opinion.

This strategy is from Kathy Lien and Boris Schlossberg and available for everybody.

http://www.investopedia.com/articles...inute-momo.asp

I made 6 trades today all winners!

Hope to start a thread, because this is a real strategy, easy to use and can be profitable for everyone.

Holger

Hi Holger

I had read your link and I can't figure out the MACD setup.
Could you show picture of it please.

Thanks
Paul

Hi Holger, and thank you for bringing this nice and simple trading setup. Investopedia is full of such neat and profitable setups and I have been trying them on demo with some success. from what I read the MACD setup is the standard setup (12,26,9) and the entry is when it crosses 0 from negative to positive for longs and the opposite for shorts.
Here's a nice 30 pips EU short move, and another 30 pip long move at 8:50 (GMT +3)

Hello,

It's nice to hear that you like it too.

Macd settings 12,26,9 like in the link in the first post. I am using a different macd which is attached. This one is the standart macd which is on the MT4.

This morning some nice moves on different pairs, just stay away from the news.
Today we have another news at 8:30. After that I am looking for the crossing of the macd.

For everybody who don't know:
Check the link for calendar about the daily news on top of the first post.
This helped me a lot in the past.

Holger

does this work on eurjpy or is it too volatile for it?

Hello,

I am only trading EUR/USD, AUD/USD, USD/CHF and GBP/USD, but this means not that it is not working on other pairs. Check the link in the frist post or just google for:

the five-min forex momo trade

to get an idea about the strategy and than you can set up your chart and go back a month to see what happened.

Next to the 20 ema I also have a 5, 10 and 50 ema on my chart.

This chart is from the original post where I found it

http://i.investopedia.com/inv/articl...e/FX-Momo2.gif


This is from the original post:

Some traders are extremely patient and love to wait for the perfect setup while others are extremely impatient and need to see a move happen in the next few minutes or hours or else they are quick to abandon their positions. These impatient traders are perfect momentum traders because they wait for the market to have enough strength to push a currency in the desired direction and piggyback on the momentum in hopes for an extension move as momentum continues to build. However, once the move shows signs of losing strength, our impatient momentum traders will also be the first to jump ship so a true momentum strategy needs to have solid exit rules to protect profits while at the same time be able to ride as much of the extension move as possible.

We developed a great momentum strategy that we call the “Five Minute Momo Trade” because we look for a momentum or “momo” burst on very short term 5 minute charts. We lay on two indicators, the first of which is the 20-period EMA (Exponential Moving Average). We use the exponential moving average over the simple moving average because it places higher weight on recent movements, which is what we need for fast momentum trades. The moving average is used to helps us determine the trend. The second indicator that we use is the MACD (Moving Average Convergence Divergence) histogram which helps us gage momentum. The settings for the MACD histogram is the default, which is first EMA = 12, second EMA = 26, Signal EMA = 9, all using the close price.


This strategy waits for a reversal trade but only takes it when momentum supports the reversal move enough to create a larger extension burst. The position is exited in two separate segments, the first half helps us lock in gains and ensures that we never turn a winner into a loser. The second half lets us attempt to catch what could become a very large move with no risk since we already moved our stop to breakeven.

Rules for a Long Trade
1) Look for currency pair to be trading below the 20-period EMA and MACD to be negative
2) Wait for price to cross above the 20-period EMA, make sure that MACD is either in the process of crossing from negative to positive or have crossed into positive territory no longer than 5 bars ago
3) Go long 10 pips above the 20-period EMA
4) For aggressive trade, place stop at swing low on 5 minute chart. For conservative trade, place stop 20 pips below 20-period EMA
5) Sell half of position at entry plus amount risked, move stop on second half to breakeven
6) Trail stop by higher of breakeven or 20-period EMA minus 15 pips


Rules for a Short Trade
1) Look for currency pair to be trading above the 20-period EMA and MACD to be positive
2) Wait for price to cross below the 20-period EMA, make sure that MACD is either in the process of crossing from positive to negative or have crossed into negative territory no longer than 5 bars ago
3) Go short 10 pips below the 20-period EMA
4) For aggressive trade, place stop at swing high on 5 minute chart. For conservative trade, place stop 20 pips above 20-period EMA
5) Buy back half of position at entry minus amount risked, move stop on second half to breakeven
6) Trail stop by lower of breakeven or 20-period EMA plus 15 pips



Holger

SXMTrader, what about this?

Hello,

Is there a system which is 100% without loosing trades?
I learned that it is not! Money managemet is the answer. I have 4 pairs and if I take the signals from the macd and take profit of just 10 pips, I can have 50 - 60 pips fast. Even with 1 or 2 loosing trades a day, I can get my daily profit. You have to read the original from the creators.
You find the link in the first post.

You can scalp this way for 10 pips or if you are more experienced, let your profits run and you can catch good trends. Keep loosers small.

Holger

As long as the mkt is on a trend you get pretty good returns,but if the mkt is in a range than you can face some draw-downs due to false signals.

And most of the time the market is ranging !

Not necessarily.
The trick is to be able to identify when mkt. shifts from trend to range.Don't forget you trade on 5min. chart here!
Is a mechanical system and even I'm not a big fan of mechanical systems in general, I must say this is one of the best I have seen out there so far!

I would suggest adding a 150 EMa to trade the signals according to the trend. I'm surprised it was not considered by the author, but I think the system was built for impatient traders. But on a 5 min chart, it is worth waiting a few minutes IMO.

Chamane

This is one of the first profitable methods I ever tried. I'm using price action mostly now, but this is a nice way to catch the days big moves.

The only downside is in between market hours when liquidity slows down, a lot of false signals are generated. The trick is in the timing of looking for setups an hour or so before a major session opens.

A range is composed of a plethora of mini-trends...

Also, another thing that helps!

When you open up the properties in your 20 EMA, goto the Levels tab, and add these.

10
-10
20
-20
15
-15

The 10 levels help you guage instantly if price is 10 pips above or below the EMA, the 20 tells you where you place your stop, and the 15 is where you would trail your stop.

Thank you for your ideas.

To get an idea about the trend I have the 50 ema. But from other sustems I know that they use the 100 sma or now your recommendation with the 150 thank's.

It is correct that we have to be able to see if there is a trend or a flat market, which means to stay out in flat markets or just scalp with the macd crossing the zero line for 5 pips?! But if we have a trending market or the market is moving strong, we can get very easy our daily profit.

This is a very good system and I like it. I feel very comfortable to take orders. We only have to look how strong the market is moving to make a decision about TP and trailing stop to keep loosers small and to reach our daily goal. Don't go for too much, if your goal is reached - stop for the day.

Excuse me for my english, it is not that easy to write it correct, hope you understand the meaning. I am german and try my best.

While I was writing this post others added some comments. First of all I like to see that you like this strategy, because this will help to get a lot of ideas to help others.

Please continue to post your comments and ideas.

Thank you

Thanks to open this thread. I think that all of your suggestion abot identify the trend ase useful. I think I will add a 100 Ema.
THanks to All of you

nice suggestion Delfino, it gives an instant visual aid for entry and SL and can be used for take profit as well.
for trend identification, let us not forget the title of the strategy, the 5M momentum trade. it exploits a momentum move over a lower time frame. if one wants to avoid the losing trades we can only take those moves with the trend and this can be determined on a higher time frame, like 15M 30M or 1H. The MACD is also a good indicator of trend if you have the full MACD (not just the histogram), like the one in post#3. So identify the move on higher TF and then zoom in on the 5M for entry, no need to add more EMA's. keep it as simple as it was suggested in the beginning.

I might have to experiment also with an immediate break-even stop. At 10 pips move stop to break even, but wait until 1:1 to close half the position.

Since the basis of the trade is to exploit momentum bursts, in most momentum situations the trade should take off and not retrace back to entry once its 10 pips in profit. This will help avoid losses if you enter during a tight ranging period.

I like MoMo Strategy