In the trading world, there are several traders types and various strategies they can use. We are all different and we have to determine what works well for us. Today, we present a strategy that is good for short-term traders who expect fast results. It is known as a MOMO strategy.
Setting up the chart
Before you apply a certain kind of strategy, you must prepare your chart. Log into your Binomo trading account and choose the asset you will trade in the session. For the MOMO strategy, I suggest major currency pairs.
The next step is to select the chart type and its timeframe. It should be set for 5 minutes.
Now, the MOMO strategy requires you to attach two indicators to the chart. The first one is the Simple Moving Average and the second one is the Moving Average Convergence Divergence. Click on the indicators icon and find them. Then, change the SMA period to 20. The settings of the MACD remain as default, 12, 26 and 9.
MOMO strategy in trading
You will use the MOMO strategy to trade trend reversals. First, you will determine the trend with the SMA which is the line that plots over the prices. Then you will catch momentum with the MACD which is visible below the price chart in the form of a histogram. The bars appear around the middle 0 line.
MOMO strategy for short trades
Observe the chart. The price bars should be formed above the Simple Moving Average line and the MACD should show positive values. You are now waiting for the moment of the trend reversal which can be identified when the price intersects the SMA20 from above and the MACD turns negative or it is already negative since 5 preceding candles. Open a short position for around 15 minutes which is the duration of three candles.
MOMO strategy for long trades
In the beginning, the price bars should appear below the SMA line and the MACD should have negative readings. Then, the price goes above the SMA and the MACD moves to the positive area at the same time or it is already there since 5 preceding candles. This is the moment you want to open a long transaction. Keep it open for the duration of three candles that is for 15 minutes.
Summary
Momentum traders can use the MOMO strategy to open both, short and long transactions. This strategy helps to identify the trend thanks to observing the Simple Moving Average, and to assess the momentum with the Moving Average Convergence Divergence. Trade major currency pairs on the 5-minute chart.
Make analysis thoughtfully as no strategy guarantee you will gain profits. False signals happen so be careful when you enter and exit your trades. With the MOMO strategy, your transactions should last 15 minutes.
Binomo offers a free demo account where you can check how the strategy works without worrying you lose your money. Choose the asset, attach the SMA and the MACD to the price chart, and see how the MOMO suits you.
Best of luck!