Trigger Lines Momentum Forex Trading Strategy

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Trigger Lines Momentum Forex Trading Strategy 1

One of the analogies that I would think of when trading trend following strategies is that of a running man tied on a big elastic band.

In a trending market environment, price tends to want to run towards one direction. However, because of the presence of buyers and sellers in the market, price seems to be held back from its one directional push. This is because prices that are getting cheap would be attractive for buyers, and price that is getting more and more expensive would be attractive for sellers. Sooner or later these buyers or sellers would be making transactions that would cause the trend to stall a bit. This is the force holding price back. This is the elastic band tied around the waist of the runner.

Because of the pressure of the “elastic band” price would stall a bit. Imagine the running man wanting to rest because of the stress of having to run against the elastic band. Then, as soon as the running man is rested, he could then go for another sudden run. If the running man has enough power beneath his legs, he could still run much longer. If price has momentum behind it, then the trend could resume.

Trigger Lines Momentum Forex Trading Strategy is a simple strategy built around this concept. It uses a couple of custom indicators which are modified moving averages that would help identify the mid-term trend and the short-term trend. Trade entries are generated whenever the two trends align.

Triangular Moving Average

Triangular Moving Average (TMA) is a modified moving average indicator which is geared towards a smoother moving average line.

Classic moving average lines often do not work well during choppy market conditions. Price spikes which are common in the forex market would cause moving average indicators to produce false signals. Traders are duped into entering a trade thinking that a trend is forming. This leaves them trapped in a trade that is going nowhere or worse, they are in a trade that is about to whipsaw them to a loss.

The Triangular Moving Average (TMA) indicator was developed to address this issue. Traders often attempt to smoothen the moving average line in order to lessen its susceptibility to false signals. TMA takes it a step further by smoothening the moving average twice. In a way, TMA is the average of multiple Simple Moving Averages (SMA). This creates a moving average line that is extremely smooth.

Because of its smoothened characteristics, the TMA line tends to lag a bit more compared to other moving averages. However, it is also less susceptible to price spikes. This makes the TMA line more suitable as a trend direction filter rather than an entry trigger.

Trigger Lines Indicator

The Trigger Lines indicator is another custom indicator built around moving averages. Trigger Lines is based on the Least Squares Moving Average (LSMA) lines.

Least Squares Moving Average (LSMA) is a modified moving average line that tends to produce signals much faster than other moving average lines. It is a very responsive moving average line making it ideal for entry trigger signals.

The Trigger Lines indicator is composed of two LSMA lines. Trade signals are generated whenever the two lines intersect. The indicator also changes color to signal the trend change. Blue lines indicate a bullish trend while red lines indicate a bearish trend.

Trading Strategy

This strategy is a simple crossover strategy that aligns both the long-term and short-term trends.

The TMA line is used to identify the mid- to long-term trend. Trend direction is based both on the location of price in relation to the TMA line and the slope of the TMA line.

The Trigger Lines indicator act as an entry trigger. Trade signals are generated whenever the faster LSMA line crosses the slower LSMA line. This would also coincide with the changing of the LSMA lines colors.

Indicators:

  • tiragnulatMA
    • Periods: 47
  • Triggerlines (default settings)

Preferred Time Frames: 1-hour and 4-hour charts

Currency Pairs: major and minor pairs

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price should be above the TMA line (red).
  • The TMA line should be sloping up.
  • Price should retrace for a while causing the Trigger Lines to temporarily change to red.
  • The faster Trigger Line should cross above the slower Trigger Line causing the lines to change to blue.
  • Enter a buy order on the confirmation of the conditions above.

Stop Loss

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

Exit

  • Close the trade as soon as the Trigger Lines change to red.

Trigger Lines Momentum Forex Trading Strategy 1

Trigger Lines Momentum Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price should be below the TMA line (red).
  • The TMA line should be sloping down.
  • Price should retrace for a while causing the Trigger Lines to temporarily change to blue.
  • The faster Trigger Line should cross below the slower Trigger Line causing the lines to change to red.
  • Enter a sell order on the confirmation of the conditions above.

Stop Loss

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

Exit

  • Close the trade as soon as the Trigger Lines change to blue.

Trigger Lines Momentum Forex Trading Strategy 3

Trigger Lines Momentum Forex Trading Strategy 4

Conclusion

This trading strategy works well on a fast trending market condition. As soon as you could identify a fast trending market, then you can use of this strategy.

Trade setups that are generated at the start of the trend also tend to work better. Trends that have had three or more momentum price pushes might have a lower probability of generating a winning trade.

Beginner traders could use this strategy as it is an easy to follow strategy. Keep in mind though that your success with using this strategy would depend on your proficiency in identifying if it is the right market to use this type of strategy.

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