What is Elder’s Momentum and How to Use It?
Elder’s Momentum is a technique offered in the book “Psychology, Trading Tactics, Money Management,” by Alexander Elder. It is based on the philosophy, which follows the trend. This strategy uses two primary indicators: Moving Average and indicator of Momentum. There are also certain rules of entry and exit. This technique uses time graphics. One can use it for any currency, as this strategy is a multi-currency one. Another reason for its popularity is the possibility to use this strategy for both manual and automated trading.
Advantages of Elder’s Momentum
1. It uses special coloured indicators, so even the absolute amateur can guess where is the signal and how to use it to get a profit;
2. Candles, used in this strategy, take into account both the momentum and the trade. By doing this Elder’s Momentum makes the work of a trader much easier;
3. It can be accessed on your cTrader trading platform, with just one click.
In order to know how to use it once you find it on your platform, you should get to know about the entry and exit rules, so we will explain them in more details below.
Entry Rules: What are They?
There are three main parts of entry rules:
● Trend recognition: this rule uses momentum indicator t =o signal to the uses when the level is higher than 100, and it stays such. It means that uptrend found. In case the level gets lower, a uses faces downtrend;
● Signal trigger: it should cross EMA by the price;
● Confirmation: once the signal is confirmed, and the trader is to open trade bar.
Abovementioned signals also inform users whether to sell or buy. Here are the features of both of them.
Buy Signal Feature
1. Market shows downtrend, which means that EMA is higher than price and the momentum is not higher than 100);
2. Previous Price bar is higher than the given one;
3. Current bar is close to the previous one and starts rising.
Sell Signal Features
1. Marker is in uptrend (momentum is above 100, but the price is lower than EMA);
2. Current bar is close to the previous one and starts falling.
Exit Rules Explained
There are several main types of exit rules, including exit rules by taking profit, by stop loss and earl exit.
Take profit rules can be applied after some reward was gained in order not to use exit rules by stop loss. Keep in mind that relation between SL and TP is extremely important.
Early Exit Rules
There are only two rules in this section, and they are:
● Exit is the prices crosses EMA;
● Exit if momentum is higher than 100 for sell and lower than that for buy.