Hugo
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Hugo in HTO Trading,

Gauging momentum

This is the first of a four lesson course

Any given market trends only 15% to 20% of the time that’s why momentum strategies fail through most market conditions however if a trader is quick to adapt tactics as market conditions change he will improve dramatically is change of success.

This can be accomplished by using breakouts strategies on strong momentum and reversal strategies (fading momentum) on weak momentum.

A successful momentum strategy requires solid market reading skills and it takes severe discipline to trade because on the first sign of weakness we should be able to decide if the trade should be closed or carry on.

Physics teaches that an object in motion tends to remain in motion in other words is a move that is going to take some effort to stop.

In physics: Momentum = mass x velocity

It becomes obvious that an object has a large momentum if both its mass and its velocity are large.

My definition of market Momentum = sentiment x velocity

Also in the markets becomes obvious that a financial instrument has a strong momentum if both its sentiment and its velocity are large.

Price is king, a famous quote from Wall Street and there is nothing on a chart that matters more than price.

The velocity is given by the range of the candlestick body, the wider the body greater is the velocity.

The sentiment can be obtained by combining the Candlestick close position on one hand and on the other hand the candlestick close comparison, that will learn in detail in the next two lessons.