Best ways to Trade Momentum.
Step 1 Running which ever trading software you use, open up the charts to view daily signals and weekly signals. Enable the MACD Histogram. Keep in mind that the histogram is an indicator of the MACD, and neither are immune to lagging. Resist the temptation to buy right when you see a peak on the charts.
Step 2 Resist early entry. Watch the daily signals that reflect the weekly signals. Ignore the signals on the daily chart that do not agree with the weekly signals. What you’re looking for here is essentially the repetition of the longer trend rather than the shorter fluctuations on the daily charts.
Step 3 Read the 9 day EMA chart. If you see a greater number than the nine day reading, that will indicate the value on the histogram of the MACD to be positive. If you see a lesser number than the nine day EMA, then the result will be a negative MACD histogram reading.
Step 4 Identify peaks and troughs on the charts. If you see two or more peaks or troughs, then that could indicate a good time to buy or sell. At this point you will read the histogram. The histogram will project the next movement of the MACD. Keep in mind that the MACD and the MACD histogram are only indicators, and are not precise indicators of real time movement.
Step 5 Decide whether or not to exit. Sell your stock when you see the MACD diving at a rate quicker than the EMA indicator. This is a sign of a bearish momentum. Always go back and look at the weekly chart to see if there is a match for the ups and downs on the daily chart. If there is a match more than once, then pay attention to the trend. Always give more weight to the weekly trend over the daily dips.
Step 6 Stick with your exit strategy. If you are trading with both the EMA and MACD going up on the charts, the very second you see either indicator start to turn the opposite direction, you must close out quickly. Don’t wait for the signals to go back up. Close and take your earnings.
There is never anything wrong with lockingin profits. You should always lock in profits when they are there. There are too many times where the trade will go the other way. This is especially true for day traders. If you want to be successful at day trading you have to lock in profits. This sounds easier than it is. You have to seperate your emotions from your trades and trade what you see and not what you feel. Protect your profits and cut losses short and you will be one step ahead of the game.
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