The Quick & Easy Strategy of Forex Momo Play

By | March 22, 2015
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The Quick & Easy Strategy of Forex Momo Play

 

Have you ever heard of the term “Momo”? Other than associating it with a flavorful Tibetan delicacy, it’s a word that many traders are familiar with. In fact, when it comes to the foreign exchange market, these people, especially the experienced groups, beam with joy at the thought of it. So, what is it, really?

What’s a Forex Momo Play ?

Momo Play, introduced by famous forex analysts Boris Schlossberg and Kathy Lien, is the trading strategy that involves looking for a spike of momentum in (very) short charts and identifying the Breakeven Point or BEP. By using it, together with the Moving Average Convergence Divergence or MACD, traders will be hardly interested about anything else but short-term gains. Since it follows the concept that the market should be in the right condition prior to placing a trade, it’s an ideal tactic for both day traders and momentum traders.

5 Minutes Is All It Takes

Keeping in mind the fact that there are some traders who tend to abandon their positions after some time of not observing any movement in charts, the Momo Play requires execution of more or less 5 minutes. After identifying the Exponential Moving Average or EMA, trading can commence. Once the market is strong, you are presented a cue saying it’s a great time to enter. And, as soon as it shows signs of weakness, it’s recommended to construct a plan for your exit.

7 simple rules

For short-term trades:

  1. Focus on a currency pair that has a positive MACD and is located above the 20-day EMA.
  2. Monitor the price as it crosses below the 20-day EMA.
  3. Go 10 pips below the 20-day EMA.
  4. Initiate a trade.
    • For a conservative trade, position a stop above the 20-day EMA.
    • For an aggressive trade, position a stop at a swing high.
  5. Gain back your entry position.
  6. Reach the BEP by moving the stop to the 2nd half.
  7. Position the stop at the 20-day EMA with additional 15 pips.

For long-term trades:

  1. Focus on a currency pair that has a negative MACD and is located below the 20-day EMA.
  2. Monitor the price as it crosses above the 20-day EMA.
  3. Go 10 pips above the 20-day EMA.
  4. Initiate a trade.
    • For a conservative trade, position a stop below the 20-day EMA.
    • For an aggressive trade, position a stop at a swing low.
  5. Sell half of your position at entry.
  6. Reach the BEP by moving the stop to the 2nd half.
  7. Position the stop at the 20-day EMA with 15 pips less.

Better Luck Next Time

There’s no doubt that the Forex Momo Play is a powerful forex strategy. The downside is that there will be instances that its reliability becomes questionable. At times, it can capture wrong reversal moves. It is important to be prepared for that possibility. Thus, granted you’re willing to come up with ways to trade right the next time around, you’re likely bounce from a loss.

 

References: Some of the information have been taken from http://www.investopedia.com/terms/m/momoplay.asp and http://www.mtrading.eg/education/