Momentum trading is one probably one of the most exciting types of trading strategies. It is a fast-paced type of trading that could help traders potentially make quick profits from the market. This is because the nature of momentum trading is naturally fit for quick trades. Traders could get results quick. They could see if their trade setups would work or not almost immediately.
Momentum trading is the type of trading wherein traders find the opportunity whenever the market starts to move fast in one direction. This means that large volume of trades has caused price to move up or down at a relatively short amount of time. This is why it is called momentum. It is a price movement where there is volume and velocity behind it.
Imagine a speeding truck filled with heavy cargo running down a highway. You would not want to be in front of that truck. Any obstacle that is placed in front of it would most likely be plowed along as the truck crashes through the obstacle. That is momentum.
The same is true with trading. If a momentum price move develops, you would certainly not want to trade against it. It is more likely that price would just barrel through it and straight through the stop loss. Trading with it though is a different story and would be very rewarding.
FX Fish Bands Forex Trading Strategy is a simple momentum strategy that trades on signals momentum based on a systematic rule-based approach.
FX Fish Indicator
The FX Fish indicator is an oscillator type of indicator which was developed to help traders identify the cyclical trends of the market. It is based on a mathematical formula in statistics, which is intended to normalize price fluctuations within a certain range.
FX Fish converts historical price movements into a normal distribution. This allows traders to identify the peaks of and troughs of price movements by aligning it with the extremes on the FX Fish indicator.
The figures are plotted as histogram bars on a separate window. Positive bars are painted lime, while negative bars are painted red. Positive bars generally indicate a bullish bias, while negative bars indicate a bearish bias.
The indicator also has markers at -0.3 and 0.3. These levels indicate the level which the FX Fish indicator must break in order to confirm a trend or momentum developing.
Traders can use the crossing over of the bars from negative to positive or vice versa as potential trend reversal. Traders could also use the levels -0.3 and 0.3 as the trigger which confirms the trend reversal.
As a trend filter, traders could use the FX Fish indicator to avoid trades that are against the trend bias or trades that are not in a strong trending condition.
The Bands indicator is a custom technical indicator which could be used in a variety of ways. Although it is mainly a trend following indicator, it could also be used to identify momentum and oversold or overbought markets.
The Bands indicator is composed of three lines. The middle line is a modified moving average, which is typically set at 20 periods. Just like a regular moving average, traders can use it to identify trend direction based on its slope and the general location of price action in relation to the middle line.
It also has two outer lines, one on top and one at the bottom. These two lines are basically deviations from the middle line.
The outer line can be used as a momentum indicator or an oversold or overbought indicator. If a momentum candle closes outside of the bands, then price might be starting a trend based on momentum. Inversely, if price action rejects the area outside of the bands, then price might be retracing to its mean coming from an oversold or overbought condition.
This trading strategy is a simple momentum strategy which trades on the momentum signals coming from the FX Fish and Bands indicator.
On the FX Fish indicator, momentum is simply identified based on the bars breaching 0.3 on a bullish condition or dropping below -0.3 on a bearish condition.
The Bands indicator will be used to confirm momentum based on how price behaves as it touches the outer lines. If price closes outside of the outer lines with a strong momentum candle, then the momentum trade setup is confirmed.
Lastly, we will also be using the crossing over of the 10-bar Exponential Moving Average (EMA) and the middle line of the Bands indicator as a confirmation of the momentum signal.
Preferred Time Frames: 30-minute, 1-hour, 4-hour and daily charts
Currency Pairs: FX majors, minors and crosses
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
- On the FX Fish indicator, the bars should be lime and should be above 0.3.
- A bullish momentum candle should close above the upper line of the Bands indicator.
- The 10 EMA line should cross above the middle line of the Bands indicator.
- Enter a buy order upon confirmation of these conditions.
- Set the stop loss on the support below the entry candle.
- Close the trade as soon as the FX Fish bars become red.
Sell Trade Setup
- On the FX Fish indicator, the bars should be red and should be below -0.3.
- A bearish momentum candle should close below the lower line of the Bands indicator.
- The 10 EMA line should cross below the middle line of the Bands indicator.
- Enter a sell order upon confirmation of these conditions.
- Set the stop loss on the resistance above the entry candle.
- Close the trade as soon as the FX Fish bars become lime.
This trading strategy is a decent momentum trading strategy. It trades with the general bias of the market based on the trend indications coming from the FX Fish indicator and confirms momentum breakouts based on the Bands indicator and the 10 EMA line.
This strategy works best at points on the market where price action is either breaking out of a congestion phase or reversing from a prior trend.
Traders who can maintain a good reward-risk ratio using this strategy can profit from the forex market over the long-run.
Forex Trading Strategies Installation Instructions
FX Fish Bands Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
FX Fish Bands Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
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How to install FX Fish Bands Forex Trading Strategy?
- Download FX Fish Bands Forex Trading Strategy.zip
- *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex strategy
- Right click on your trading chart and hover on “Template”
- Move right to select FX Fish Bands Forex Trading Strategy
- You will see FX Fish Bands Forex Trading Strategy is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
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