Mr. Charts
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I trade on a combination which includes momentum as in the thread in my signature.
There are books on the subject but imho they aren't any good.
Richard
There are books on the subject but imho they aren't any good.
Richard
blancspa
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Mr Charts
Thanks for posting. There are similarity of patterns applicable in trading stocks and currencies undoubtedly. However the inability to apply volume, L2 in currency spot market is a concerning constraint to me. The nature and character of momentum trade, by that I preposition liquidity as a important factor in spot forex, would be somehow diffrent to mid cap stocks trading, I conclude.
I need something on patterns-momentum collusion, with the dynamics you referring to from your experience.
Kind Regards
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meanreversion
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Isn't it going with the flow? Trade with the market rather than countertrend .. ?
blancspa
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Probably...How would you know that the momentum is building then maybe additional Q to expand on your contribution?
meanreversion
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I'm not sure about the precise definition but it's probably something like this -
if moving averages indicate the market is in an overall uptrend, and RSI recovers from below 30 to above 30, then buy (i.e. go with the momentum).
if moving averages indicate the market is in an overall uptrend, and RSI recovers from below 30 to above 30, then buy (i.e. go with the momentum).
elitejets
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I don't think you need an indicator for momentum trading.
I would say breakout traders are momentum traders and anyone who jumps on whatever is moving that day.
From investopedia:
In momentum trading, traders focus on stocks that are moving significantly in one direction on high volume. Momentum traders may hold their positions for a few minutes, a couple of hours or even the entire length of the trading day, depending on how quickly the stock moves and when it changes direction.
I would say breakout traders are momentum traders and anyone who jumps on whatever is moving that day.
From investopedia:
In momentum trading, traders focus on stocks that are moving significantly in one direction on high volume. Momentum traders may hold their positions for a few minutes, a couple of hours or even the entire length of the trading day, depending on how quickly the stock moves and when it changes direction.
Mr. Charts
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It doesn't necessarily have to be high volume at all.
Richard
Richard
BSD
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Yup.
Good read:
ABN AMRO: Momentum trading can deliver big profits to investors
As I keep saying: None of this is rocket science, just good old common sense.
Thing to remember of course is to not be fooled by 20/20 perfect hindsight when going through charts and seeing woulda-coulda-shoulda opportunities and getting all excited when you wouldn't have taken them in real life, or would have jumped on a couple that fizzled out, and then missed out on the next one that turned into a biggie.
Trading is and always will be just a probabilities game, must be remembered.
That said, far better risk / reward ratios are to be had buying pullbacks, not breakouts.
BSD
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Very salient read in this regard that goes beyond the far more favorable odds you can create for yourself with being able to trade with very tight stops when buying pullbacks:
Do You Buy Breakouts? Think Again
meanreversion
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This article, although interesting, is one person's point of view. I would argue that the problem with applying a trend model to S&P is that it's an aggregated index of a large number of stocks. Trend systems seem to work best with "real" currency pairs, e.g. EUR/USD, not GBP/CHF, and sometimes interest rates.
Whatever the reason, it's important to backtest yourself across different markets in order to gain confidence in the model.
The essence of breakout trading is that as a price approaches a new extreme, it will be unstable. It might retrace (it usually does) or it could breakout, in which case you could see a large move. Thus breakout strategies will enter in a small amount on a breakout with a tight stop. If the market continues to move in the same direction, add to the position. It's a bit like creating a synthetic option. In the end, you'll have 60-80 pct of small losses, with 5-10 pct of big winners and the rest small to medium winners.
Whatever the reason, it's important to backtest yourself across different markets in order to gain confidence in the model.
The essence of breakout trading is that as a price approaches a new extreme, it will be unstable. It might retrace (it usually does) or it could breakout, in which case you could see a large move. Thus breakout strategies will enter in a small amount on a breakout with a tight stop. If the market continues to move in the same direction, add to the position. It's a bit like creating a synthetic option. In the end, you'll have 60-80 pct of small losses, with 5-10 pct of big winners and the rest small to medium winners.
Konviction
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I agree as well that momentum trading can be done with indicators, but imo is better without them. One needs to understand market structure. All stocks have some degree of momentum, but remember:
1. Stocks with the highest degree of momentum are usually the ones going down
2. Trade momentum in the direction of the over all trend
1. Stocks with the highest degree of momentum are usually the ones going down
2. Trade momentum in the direction of the over all trend
