Different Type of Market Analysis

What is a Momentum Trend?

A momentum trend is one that has more momentum than the earlier one, it can be depicted using a more steeper trend line than the one that was in play before. When a new line forms that is much steeper than a earlier one we say that the trend has gained more momentum & becomes much stronger. These types of set-ups requires a different type of market technical analysis.

In the example shown below: Also when cfds price is moving upwards within a channel, if it breaks the upward channel a stronger trend is shaped as illustrated in the illustration below. If as a trader your chart breaks an upward trend line to the upward side in an up moving market like the one below, Do not Try to Sell, Buy More Contracts, Remember this cfd trading tip it can make you a lot of money just like the way it did in the trading analysis below.

Channel Break Upward - More Momentum on Upward Market Movement

Using same technical analysis example above we can also see how new steeper trendlines were shaped showing the trend was gathering momentum.

This is illustrated by the steeper trendlines that can be portrayed as the cfds price progresses.

The newly shaped trend has more strength than the previous one as displayed by the forming of the steeper trend line.

This forms trend B & 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 chart.

This is shown in the example shown below by the three lines A, B and C showing formation of stronger trends as the market continues to gain momentum.

Price Gathering More Momentum

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

This strategy can also be used by short-term traders like the day trader or the scalper, this pattern will oftenly form on the 5 minute & 15 minute chart. This parabolic trend lines can be used to know where to take profit. A trader should immediately book his profit as soon as the steepest trendline is broken.

How to Trade These

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

Analysis Example

For this example we shall use short term trading chart of minutes for plotting, 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 one trading long would have waited until the steep most trend line was broken then closed the trade & taking profit at this place thus making a profit of 42 pips on this buy trade. One would have exited the trade position at the best time and thus avoiding the choppy market that followed.

What is it?

Sometimes a market moves in a parabolic formation, and this is seen when panic buying sets in and prices is pushed vertically. During a parabolic up move, there is almost complete absence of bears, which initiates a vacuum of buying. When this occurs traders scramble to just get in to the market regardless of cfds price, in fear of being left backwards. This move can make the largest cfds price moves in the shortest amount of time, traders will put buy orders in this cfds trade setup.

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

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

When a cfd moves in this way, the highest level which is reached often symbolizes end of a move with prices not going back to the ultimate highs again for a very long time. When this point is reached & the most steepest trendline is broken it is best to consider that as a trend reversal and it's best to take time off the market & enjoy your profits for a while before calculating what's your next move.

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

The steeper a trend line angle, the less dependable it becomes. When the most steep is broken its best to exit this trade transaction. The example shown below is for crude oil that has shaped a parabolic setup. Another example is cfds 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 happen-to come across a parabolic trend in an upward trend just keep opening buy & buying some more and you'll more likely to make profits trading this market trend direction, there will be no added analysis requirement just the trend lines. The one thing to remember is to exit once the steep most line is over because the reversal on this pattern is very quick you need to also be very fast. Just make sure that you get out at the correct spot just like in the above example.

For example, the above parabolic movement is of crude oil trading chart, the traders had dominated to drive the cfds price of oil from $70 to $150 over a period of a couple of months and at the top of the market those who call themselves analysts were so bullish that they predicted the cfds 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 steep most trend line was broken the analysts kept insisting the cfds price would hit $200, guess what, after the most steepest trend line was broken it didn't even take 2 weeks to take the cfds price of oil, back to $50 at sometime it was even $35. That is parabolic analysis, now-you-knownow-you're-informed.

Good examples of this cfd setup on trading charts is the week and month cfds price charts for CFD Trading and Crude Oil, these trading charts can be found on MetaTrader 4 trading platform depending on your broker.