Price Channel Momentum Trend Break Forex Trading Strategy for MT5

Price Channel Momentum Trend Break Forex Trading Strategy for MT5

There are a couple of ways to identify when a trend is continuing. One way is to look at how prices react when they reach certain levels. Another way is to look at how strong the momentum is in the direction of the trend.

This strategy is a continuation strategy that uses momentum. The 50 SMA line and the Price Channel Indicator help to identify when there is potential for the trend to continue.

Price Channel Indicator

The Price Channel Indicator is a type of indicator that shows the trend and momentum direction based on price action movements. This indicator finds and identifies the highest highs and lowest lows in a given time window, which is preset at 22 periods. However, this variable can be modified within the indicator input settings.

The indicator finds the range of the highest high and lowest low for the given number of bars. The area is shifted one bar to the right and shaded in dodger blue.

The median is found by adding the highest high and the lowest low, then dividing it by two. A blue line marking the median of the range is plotted.

The range indicator is used to identify a channel and staircase-like line that moves when the market is trending. This is more evident when the market is trending.

This indicator can be used to identify trending markets based on where price action generally is about the middle line. The market is in an uptrend whenever price action is generally above the middle line, and in a downtrend whenever price action is generally below the middle line.

The middle line can also be used as a support and resistance area. The price might pullback and stop near the middle line before the market momentum resumes in the direction of the trend.

50 Simple Moving Average

The 50-bar Simple Moving Average (SMA) is one of the most popular moving average lines used by traders. It is widely regarded as one of the main mid-term trend indicators.

Traders often interpret the mid-term trend direction based on where price action is about the 50 SMA line. The market is in an uptrend whenever price action is above the 50 SMA line, and in a downtrend whenever price action is below the 50 SMA line.

The 50 SMA line usually moves along with the price of a security. The slope of the 50 SMA line can tell you whether a security is in an uptrend or downtrend. When the market is in an uptrend, the 50 SMA line slopes up, and when the market is in a downtrend, it slopes down.

Many experienced traders use the 50 SMA line to help them figure out where the trend is going. In this rule, they only trade in the direction that the 50 SMA line points. If the price is below the 50 SMA line, they don’t take buy trades. If the price is above the 50 SMA line, they don’t take sell trades.

The 50 SMA line can also act as valid dynamic support or resistance level. Price may bounce and reverse as soon as it touches the 50 SMA line reverting to the direction of the trend.

Some people also use the 50 SMA line as a trend reversal signal. This is based on either the crossover of price and the 50 SMA line or the crossover of a faster moving average line and the 50 SMA line.

These concepts are opposite, which is why it is sometimes confusing which direction to trade when the price touches the 50 SMA line. Some people would avoid trading when price action starts to challenge the 50 SMA line and wait for a confirmation of either a trend continuation or a reversal.

Trading Strategy Concept

This trading strategy is a trend continuation strategy that uses the 50 SMA line and the Price Channel to identify when the trend is continuing. The trend is identified based on where price action generally is about the 50 SMA line, as well as the slope of the line. Another layer of trend confirmation is also added to ensure that the market is trending in one direction quite significantly. This would be based on where the middle line of the Price Channel is about the 50 SMA line.

We would wait for the price action to move back near the 50 SMA line. We would then wait for the price action to cross and close on the other side of the Price Channel going against the trend. Once this happens, we would wait for a momentum candle to cross the middle line of the Price Channel and close strongly in the direction of the trend.

Buy Trade Setup

Entry

• The price should be going up and stay above the 50 SMA line on the chart.

• The 50 SMA line should also be pointing upwards.

• The price should pull back below the middle line of the Price Channel, but only briefly.

• You can enter a trade when a bullish momentum candle closes above the middle line of the Price Channel.

Stop Loss

  • Place the stop loss order below the candle.

Exit

  • If the price of a security falls below the middle line of the Price Channel, close the trade.

Sell Trade Setup

Entry

• The price should be going down and the middle line of the Price Channel should be below the 50 SMA line.

• The 50 SMA line should slope down and the price should pull back up above the middle line of the Price Channel.

• When you see a bearish momentum candle close below the middle line of the Price Channel, you can open a trade.

Conclusion

This trading strategy uses momentum to identify the resumption of a trend. It can be an effective trend continuation strategy when deployed in an appropriately trending market. However, it can also produce losses whenever the market trend is weak or whenever the market is not trending. Traders must first observe the nature of the current market condition before deploying this strategy.

Forex Trading Strategies Installation Instructions

This forex trading strategy is based on the combination of two MT5 indicators and a template. The strategy uses historical data and trading signals to generate profits.

This Forex Trading Strategy for MT5 uses price momentum to predict future price movement. By analyzing the data, traders can then make informed decisions about how to trade accordingly.

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