Trading Rules For a Momentum Setup

Current market conditions are offering more trade opportunities following the momentum of the trend than mean reversion. But timing these momentum type trades is crucial, too early and you are chasing, likely getting stopped on any pullback, too late and you are getting caught on a reversal rather than a pullback. Finding that sweet spot makes a lot of difference.

At the moment I’m combing the pullback trade and the range fake break setup under a variety of timeframes and on a variety of markets to pinpoint that momentum type trade.

Rules:

1) Have a trade direction premise – In the direction of the momentum

2) Wait for the market to “unwind” – Depending on the time frame you are trading, an unwinding is a counter trend move

3) Define a short term key level of support/resistance – usually the top of a flag or a prior swing point

4) Wait for the market to push through – This setup waits for the market to push through your newly defined key level

5) Let the market fail/wick – The trade entry is taken when the market fakes out of the short term key level and pushes back in the momentum direction

6) A trade is then taken in the trend direction with a stop behind that failure point.

Watch the video for some examples:

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