The Best Momentum Trading Strategy
Momentum Trading Strategy you can try even as a beginner. Many forex traders, especially beginner forex traders, can feel lost and confused in the market. They feel that they can make money but they find it difficult to achieve this with various types of consistency. Some of them end up saying that the market is random or they suffer in the hands of fraudulent forex brokers. But this is often just an excuse.
It is clear that the market is not random and even if your forex broker is not perfect, you can still make money if you stop and think about the market and apply a top-down approach to your trading. The following will show a method that can be used to choose a currency pair in a way that statistically produces positive results.
WHAT IS A MOMENTUM STRATEGY IN FOREX TRADING?
Momentum simply means buying something if it will go up and sell it when the price drops. There are several academic surveys which show that establishing this principle for all types of speculative markets will benefit from time to time.And this also gives edge wins.
Another type of forex momentum strategy is the “best” strategy of momentum trading that buys assets with the strongest rising prices and sells them with the strongest falling prices. This also tends to work well and even tends to generate greater profits for risk ratios compared to simple momentum strategies.
“BEST” MOMENTUM TRADING STRATEGY: CHOOSING A PARTNER
The first part of this strategy is to create an excel spreadsheet that shows price changes over the past 3 months from 28 pairs of forex currencies around the world. It is simple to make calculations on each weekend using weekly opening and closing prices, as the 13-week period approaches well for 3 months.
We will use 28 currency pairs and crosses that you get from 7 global currencies.There is no reason why you cannot add currencies, even though the more exotic you get, the more expensive they get for trading.
Choose 6 pairs of currencies that have moved most strongly during the past 13 weeks. This is the pair that you will see for trading in the coming week. You will trade in the direction of movement. For example, if EUR / USD changes the value by -5%, and this is the biggest change from the pair, you will be looking for a short trade in the pair.
Over the past 6.75 years, this method shows statistical probability that results in trading. Without perfecting the method or using leverage, this method has resulted in a total return of 187.10%, where it comes for a very impressive annual return of 17.01%! The weekly average resulted in a positive return of 0.52% and a weekly median of 0.43%. average annual returns of 23.63% and mid-year returns of 19.08%.
Some of you might ask, why should we use the look back method for the past 3 months? This is a period that has worked very well for the past 7 years. Before the financial crisis in 2008, using a 6-month period would work better. using a 6-month period has also been profitable for the last 7 years but less than 3 months.It seems that a shorter period of 3 months is too fast and a period longer than 6 months is slower.
FOREX TRADING SELECTED COUPLES
This should be possible to make a better overall result by applying a trading strategy to a partner’s position and about the direction you have determined each week.
Of course every trader has his favorite momentum trading strategy. Each momentum indicator can be used. You can also pay attention to support and resistance. So which momentum trading strategy is your favorite?