Momentum Commodities Trends

What is a Momentum Trend?

A momentum commodity trend is one that has more strength than the previous one, it can be portrayed using a much steeper commodity trend line than the one that was in play before. When a new line forms that's much steeper than a earlier one we say that the commodity trend has gathered extra strength and becomes much stronger. These types of set-ups require a different type of analysis.

In the commodity example illustrated and explained below: Also when commodities trading price is moving upwards within a channel, if it breaks the upward channel a stronger commodity trend is initiated as shown in the diagram below. If as a trader your trading chart breaks an upward commodity 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 commodities 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 Up Movement

Using the same analysis examples above we can also see how the new steeper trend lines were initiated showing the commodity trend was gathering momentum.

This is illustrated by the steeper trend lines which can be depicted as the commodities trading price progresses.

The newly initiated commodity trend has more momentum than the earlier one as displayed by the formation of the steeper trend line.

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

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

Commodities Price Gathering More Momentum

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

This strategy can also be used by short term commodity traders like the day trader or the scalper, this setup will frequently form on the 5 min and 15 minute chart. This parabolic trendlines can be used to know where to set take profit. One should immediately take his profit as soon as the steep most trend line is broken.

How to Trade These

The momentum commodity trendlines 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 & therefore suitable for scalpers & 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 commodity market moves some pips in your favor and you identify this pattern then it's best to exit once the steep most trend line is broken & take profit at that point.

Technical Analysis Examples

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 a trader trading long would have waited until the steep most trend line was broken then closed the trade and taking profit at this place thus making a profit of 42 pips on this buy commodity trade. The trader would have exited the trade at the best time & thus avoiding the choppy commodities trading market that followed.

Parabolic Trends

Sometimes a market moves in a parabolic formation, & this is seen when panic buying sets in and commodities trading prices is driven 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 into the commodity market regardless of commodities trading price, in the fear of being left behind. This can make the biggest commodities trading price movements in the shortest amount of time, traders will set buy trade orders in this commodities trading setup.

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

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

When a commodity instrument moves in this manner, the highest point which is reached often symbolizes end of a move with commodities trading prices not going back to the ultimate highs again for a very long time. When this level is reached and the most steep most commodity trend line is broken it's best to consider that as a commodity trend market reversal & it is best to take time out off the commodity market & enjoy your trading profits for sometime before calculating your next move.

The same can also happen for a down commodity trend when there is panic selling and commodities trading price is also pushed vertically. This especially happens during recession.

The steeper a commodity trendline angle, the less reliable it becomes. When the most steep is broken its best to get out of this trade position. The example illustrated and explained below is for crude oil that has initiated a parabolic setup. Another example is commodity 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 commodity trend in an upward trend just keep opening buy and buying some more & you will more likely to make profits trading this direction, there will be no added technical analysis required just the trendlines. The only thing to remember is to get out once the steep most line is over because the reversal on this commodity pattern is very fast you need to also be very fast. Just make sure 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 commodities trading price of oil from $70 to $150 over a period of a couple of months and at the top of the commodity market those who call themselves market analysts were so bullish they predicted the commodities trading price of oil would get to 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 commodity trend lines held the direction of the market was upward, but even after the first steepest trendline was broken the market analysts still kept insisting the commodities trading price would hit $200, guess what, after the most steepest trend line was broken it didn't even take 2 weeks to take the commodities trading price of oil, back to $50 at sometime it was even $35. That's parabolic analysis, now-you-knownow-you're-informed.

Good examples of this commodity pattern on charts is the weekly & month commodities trading price charts for Commodity Trading and Crude Oil, these trading charts can be found on MT4 commodities trading platform depending on your broker.