ASC BS Momentum Trend Forex Trading Strategy

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ASC BS Momentum Trend Forex Trading Strategy

Understanding how currency prices move can be a daunting task. Traders would often attempt to predict what price would do, whether it will go up or down and at what level it would reverse. Often this ends in a failed attempt on predicting the forex market. The market can do whatever it wants to do, and it is often very fickle.

However, there are certain conditions that may help traders anticipate which direction price will most likely be going. Momentum is one of the telltale signs that price is more likely to move in a certain direction. It is not a hundred percent accurate but there is certainly a higher chance that price is more likely to move in the direction of momentum rather than against it. Often, it even is a precursor to a trend. It is much like the butterfly effect. One initially small condition that leads to a drastic difference in a later state. A momentum shift occurring a few candles prior can cause a new trend to develop.

Wise traders would rather not trade against momentum. Instead, there are many professional traders who have been earning so much from the forex market trading with the flow of momentum.

ASC Trend

ASC Trend is a trend following indicator which was developed to help traders identify short-term trend reversals.

This indicator identifies trend reversal points and pinpoints such trend reversals by plotting an arrow pointing the direction of the new trend.

In a way, the ASC Trend indicator is a trend reversal signal indicator. Traders can use these arrows as an entry signal or trigger for their trend short-term trend reversal setups provided that it is in confluence with other indicators that point out the direction of the long-term trend.

BS Trend

The BS Trend indicator is a momentum indicator which is based on an underlying momentum filter.

This indicator is a binary type of indicator because it only identifies whether the most recent momentum signal is either bullish or bearish. It plots a bar which is equal to 0.0001 whenever it detects a bullish momentum and a bar equal to -0.0001 whenever it detects a bearish momentum.

Traders can use this as a momentum signal. Traders can enter a trade based on the shifting of the bars from negative to positive or vice versa, provided that price action also supports the trade setup.

Traders can also use this indicator as momentum filter. Traders can take trades based on short-term momentum only in the direction indicated by the BS Trend bars.

Trading Strategy

ASC BS Momentum Trend Forex Trading Strategy is a combination of a momentum trading strategy and a trend following strategy.

First, we have to identify the main trend direction. To do this, we will be using the 50-period Exponential Moving Average (EMA). Trend direction is based on the slope of the 50 EMA line, the location of price action in relation to the 50 EMA line, as well as the characteristics of price action.

As soon as we identify the main trend direction, we should then confirm if momentum is in confluence with the main trend. This is where the BS Trend indicator comes in. Momentum will be based on whether the BS Trend indicator is plotting positive or negative bars.

Entry signals are then confirmed based on the arrows plotted by the ASC Trend indicator. These signals should align with the direction of the trend and the momentum indicated by the BS Trend indicator.

Indicators:

  • ASCTrend
  • 50 EMA
  • BullBearRSI

Preferred Time Frames: 30-minute and 1-hour charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price action should be above the 50 EMA line.
  • The 50 EMA line should slope up.
  • Price action should be in an uptrend.
  • The BS Trend indicator should plot positive bars.
  • The ASC Trend indicator should plot an arrow pointing up.
  • Enter a buy order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on the support below the entry candle.

Exit

  • Close the trade as soon as the BS Trend indicator plots a negative bar.

ASC BS Momentum Trend Forex Trading Strategy

ASC BS Momentum Trend Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price action should be below the 50 EMA line.
  • The 50 EMA line should slope down.
  • Price action should be in a downtrend.
  • The BS Trend indicator should plot negative bars.
  • The ASC Trend indicator should plot an arrow pointing down.
  • Enter a sell order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on the resistance above the entry candle.

Exit

  • Close the trade as soon as the BS Trend indicator plots a positive bar.

ASC BS Momentum Trend Forex Trading Strategy 3

ASC BS Momentum Trend Forex Trading Strategy 4

Conclusion

This trading strategy which combines momentum and trend following strategies allows traders to have a better feel as to the direction of the market, while at the same time identify the exact entry points which have a higher probability of resulting in a winning trade setup.

When used in a trending market condition with relatively strong thrusts in the direction of the trend, this strategy can produce consistent profits with a good probability of hitting home run trades that can earn huge yields.

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