Momentum Indices Trends

What's a Momentum Trend?

A momentum indices trend is one which has more momentum than the previous one, it can be drawn using a much steeper indices trend line than the one that was in place before. When a new line forms that's much steeper than a previous one we say that the indices trend has gained extra momentum & becomes much stronger. These types of trading setups require a different type of market technical analysis.

In the stock indices trading examples explained below: Also when stock indices price is moving upwards within a channel, if it breaks the upward channel a stronger indices trend is formed as shown in the diagram below. If as a trader your chart breaks an upward indices trend line to the upside in an upward moving market like the one below, Do not Try to Sell, Buy More Contracts, Remember this indices trading tip it can make you a lot of money just like the way it did in trading analysis below.

Channel Break Upwards - More Momentum on Upwards Market Movement

Using the same technical analysis examples above we can also see how new steeper lines were formed showing the indices trend was gaining momentum.

This is shown by the steeper lines that can be drawn as the stock indices price progresses.

The newly formed indices trend has more momentum than the previous one as displayed by the formation of the steeper trend line.

This forms indices trend B and C as shown in the diagram below drawn using the MT4 technical analysis software, The momentum added a new steeper line as plotted on this trading chart.

This is shown in the stock indices trading example explained and illustrated below by the three lines A, B and C showing formation of stronger trends as the stock indices trading market continues to gather momentum.

Indices Price Gaining More Momentum

However, when the steepest indices trend-line is broken then even all the others trend-lines will most likely be broken too. It's best to take profit once the steep most trend line is broken.

This strategy can also be used by short term indices traders like the day trader or the scalper, this pattern will frequently form on the 5 minute and 15 minute chart. This parabolic lines can be used to know where to take profit. A trader should immediately book his profit as soon as the steep most line is broken.

How to Trade These

The momentum indices trend-lines are good technical analysis tools for determining where to take a profit early before other traders. This momentum trading setup occurs frequently on 1 minute, 5 minute and 15 minutes trading charts & therefore suitable for scalpers & day traders. For day trading which is most common the best chart to use is the 15 minutes sometimes the 5 minutes, for example after entering a short term trade either buy/sell and the stock indices trading market moves some pips in your favor and you spot this pattern then it is best to exit once the steep most line is broken and take profit at that point.

Technical Analysis Examples

For this example we shall use short term chart of minutes for drawing, when the set-up appeared as below, it was a good point to take the profit.

Trading the Momentum Market Moves

In the above example a trader trading long would have waited until the steepest line was broken then closed the trade and taking profit at this point thus making profit of 42 pips on this buy indices trade. Trader would have exited the trade at the best time & thus avoided the ranging stock indices market that followed.

Parabolic Trends

Sometimes a market moves in a parabolic manner, and this is seen when panic buying sets in and indices prices is driven vertical. During a parabolic up move, there is almost a complete absence of sellers, which creates a vacuum of buying. When this occurs traders rush to just get into the stock indices trading market regardless of indices price, in fear of being left behind. This can make the largest stock indices price moves in the shortest amount of time, traders will place buy orders in this indices trading setup.

For this type of move it is best to keep buying - no need for technical analysis just keep buying.

This indices trend will last for months on end even upto 2 years, for this time just keep buying and as long as those weekly & monthly indices trend lines are holding just keep buying and buying.

When indices moves in this way, the highest point that is reached often marks the end of a move with indices prices not returning to the ultimate highs again for a long time. When this point is reached and the most steepest indices trend line is broken it is best to consider that as a indices trend reversal and it is best to take time off the stock indices trading market and enjoy your profits for a while before calculating your next move.

The same can also happen for a down indices trend when there is panic selling and stock indices price is also driven vertical. This especially happens during recession.

The steeper a indices trend line angle, the less reliable it becomes. When the most steep is broken its best to exit this trade. The example explained and illustrated below is for crude oil that has formed a parabolic setup. Another example is indices that formed on the weekly/monthly chart during the period shortly after the steepest line in the crude oil chart was broken.

As a trader if you come across a parabolic indices trend in an upward just keep buying and buying some more you will make a lot of profits, there will be no added technical analysis required just the lines. The only thing to remember is to exit once the steepest line is over because the reversal on this stock indices setup is very fast you need to also be very fast. Just make sure you exit at the correct spot just like in the above examples.

For example, the above parabolic movement is of crude oil trading chart, the traders had managed to drive the stock indices price of oil from $70 to $150 over a period of a couple of months at the top of the stock indices trading market those who call themselves analysts were so bullish they predicted the stock indices price of crude oil would hit a high of $200, what these analysts did not know this concept a.k.a Vacuum buying, in technical analysis market trading as long as the trend lines held the direction of the market was upward, but even after the first steepest line was broken the analysts kept insisting the stock indices price would hit $200, guess what, after the most steep line was broken it did not even take two weeks to take the stock indices price of oil, back to $50 at one time it was even $35. That is parabolic technical analysis, now you know.

Good examples of this stock indices trading setup on charts is the weekly and monthly stock indices price charts for Indices and Crude Oil, these charts can be found on MetaTrader 4 software depending on your broker.