Jun 14, 2022
The five-minute momo seeks the possibility of momentum and a "momo" burst on short-term charts. Traders use two indicators of technical significance, accessible on many platforms and software for charting, including the 20-period exponential average (EMA) and MACD. EMA is preferred over the more simple moving average due to its greater emphasis on recent developments, which is essential to make it easier for traders to trade quickly.
A moving average can be employed to establish the trend, and the MACD histogram, which can help us gauge the momentum, can be used as a secondary indicator. These settings of the MACD histogram are those employed by most software for charting: EMA = 12, second EMA = 26 the signal lines EMA = 9, all based on closing prices.
This strategy awaits the possibility of a reversal; however, it only makes use of it when the market momentum favors the reversal in enough ways to cause an extended burst. The trade is closed in two distinct segments: the first allows us to lock in gains. The second part lets us try to spot what could be an enormous move, but without risk since the stop is already relocated to break even. This is how it works:
Momo's trading strategy is very useful in finding opportunities to trade on momentum. However, just like every different strategy comes with several risks that are significant and do not always function in the way we would expect it to. So, it is important to examine the potential scenarios that could happen and learn how we can manage these in the near future.
This issue can be caused by pricing. If you are using the 5-minute Momo strategy, it is important to recognize the price range that's too narrow or wide. If the market is quiet and the price is low, it typically fluctuates within that 20 MACD and EMA as the histogram is prone to swings which means there's a chance of lots of false signals. However, when the strategy is applied in a market with an exchange range that's too broad, there's a good chance that the stop is activated before the goal is achieved.
Alongside pullback and breakout trades, breakout trades are also an important part of active trading. In these situations, it is important to look for stocks that are gaining significantly during the pre-market or have volumes immediately off the open. Then, you must ensure they have little or no resistance to overhead. If you're open to greater risk and want to earn more, you should focus on stocks with a low float. If you want to play things more secure, you should look at stocks that have a float in excess hundred million shares. Whatever your level of risk tolerance, the most important thing to do is to cut out your loser and let the winners win.