The MTF Momentum Strategy is a key factor to the trade plan that identifies high probability trade setups with minimal capital exposure.

If you are always trading with the trend, you should mount up some very impressive gains. It is easy to show a trend on any chart long after the trend is established. But how do we identify trend direction in the early stages? How do we identify when an established trend is in the later stages and in a position to make a trend reversal?

Without some approach to help identify where within the trend the market likely is, typical trend analysis will usually be too early or too late to be useful over time.

It is easy to fill a book with after-the-fact examples of trends. Trendlines, moving av- erages, channels, momentum indicators, and many other techniques can show the trend on historic data. Unfortunately, none of these techniques can reliably alert you to the beginning stages of a new trend or whether a trend is in its final stages. They can only identify an established trend, usually long after the trend is established and the optimum entry is long over.

I know, we could say that a trendline break indicates a trend is complete and a rever- sal has been made. For every trendline break that follows a trend reversal, I can show you a trendline break fake-out that is followed by a continuation of the prior trend.

Moving average crossovers are notorious for false trend reversal signals. In fact, most methods of identifying a price trend are doomed to failure for practical trade strategies with as many false reversal signals as confirmed ones. This is a bold statement, but I believe it is true. I defy any trading educator to provide evidence that his so- called trend indicator consistently provides an accurate signal of trend position and trend reversal in a timely manner that a trader can take advantage of.

How can I make this statement? What does a trendline, channel lines, moving average, or other indicator represent? Every moving average, channel, or indicator is based on historic price data. It can only represent what has happened or what is the current market position relative to the lookback period. It has little predictive value in and of itself. It will always be a lagging indicator of the trend position, never a leading indicator of what is likely to happen in the future.

However, let me make you this promise and this challenge. Name a trend in- dicator and for any market or any time frame that you are given an example of how it defines the trend, I will show you two examples where it quickly failed. Every one of these techniques, whether a trendline, volatility channel, moving aver- age crossover, or momentum indicator, can be a useful part of a comprehensive trading plan, but none of them alone will be of much use in and of itself to identify the probable trend direction for a future period.

Over and over again, you will find that price rever- sals do not coincide with the trend indicator reversals. As I mentioned earlier, for every after-the-fact, well-chosen example given, I will quickly find at least two where the trend indicator did not work to identify a trend reversal in a timely manner. However, there is a way to use some of these indicators to identify high probability trade setups.

In this chapter, you will learn how to use just about any momentum indicator as a trend indicator for trade direction in a unique but very logical way that you have probably not been taught before.

We are not concerned with identifying the exact price-swing high or low of a trend. Rather, we are concerned with identifying trades in the direction of the trend, including near the early stages of the trend and avoiding the later stages. The Multiple Time Frame Momentum Strategy that you are about to learn is the most powerful strategy to filter any market for trade direction and trade execution setups.

Not only do I believe the Multiple Time Frame Momentum Strategy is the best use of an indicator for trading strategies, I believe it is the only practical indicator strategy for real-world trading.

I use the term capital exposure to describe what many trade educators call risk. Risk is the probability of an event happening. Capital exposure is the amount of money capital that may be lost if a market moves against you. I have much more to say about capital exposure later in the book. In the world of trading, there are hundreds of momentum indicators also called oscil- lators. Most of these indicators use the same information, the open-high-low-close of a price bar, and represent about the same thing, the rate-of-change of price.

There is nothing mysterious, magical, or unique about this. All price indicators look back over a given period, called the lookback period , crunch the price data, and compare the recent price position with the price position of the lookback period.

Different indicators manip- ulate and display the output differently, but all price-based indicators represent about the same thing: the rate-of-change or how fast the price trend is moving.

The indicator reversals represent the change in momentum—the increase or decrease in the rate-of- change of the price trend. That is why you can use almost any price based indicator for the Multiple Time Frame Momentum Strategy you will learn in this chapter. The first and most basic concept is this: Momentum indicators do not represent price trends. Momentum indicators represent momentum trends. If it did, this book would be about three pages long because all we would have to do is reverse our trade position each time a momentum indicator makes a reversal, and we would compound money faster than rabbits on Viagra can reproduce.

Unfortunately, it is not that easy. Price and momentum do not always trend together. For example, a momentum indicator may make a bearish reversal and decline while the price trend continues to advance.

How can it do this? The rate-of-change of the price trend is decreasing even though price continues to advance. The bullish trend is just slowing down, so the momentum indicator is bearish even though the price trend con- tinues to be bullish. The outcome: The price trend and momentum trend run opposite of each other. Let me repeat this basic and very important concept about momentum indicators: Momentum indicators represent momentum trends, not price trends.

Never expect price to reverse when the indicator makes a reversal. Often both price and momentum reverse together, but sometimes they will diverge because the price trend is only slowing down, forcing the indicator to reverse.

So let me repeat it one more time: Momentum indicators represent momen- tum trends, not price trends. Price and momentum may not trend in the same direction. Not every momentum reversal will coincide with a price reversal.

We can only make money on price trends, at least until someone comes up with a momentum contract to trade! Even though momentum and price trends often do not move in the same direction, you will soon learn how we can use momentum trends in a simple and practical way as the primary indicator of trade direction and trade execution setups.

You will also learn how, by incorporating dual time frame momentum trends in a comprehensive trading plan that also includes the time, price, and pattern position of a market, you can identify whether the market is at or very near a price trend reversal. For at least the first 10 years I traded, I never used an indicator. I was basically a pure chartist using time, price and pattern position to identify trade setups and targets.

My strategy was based on Gann, Elliott, and Fibonacci. In , I released what I believe was the first futures trading home study course, called the W. Gann Home Study Trading Course , based on Gann, Elliott, and Fibonacci trade strategies. This course is no longer available. I studied a lot about indicators and discovered I could always find an indicator or make a change in a lookback period or other setting for the indicator to confirm whatever price trend bias I had. Around the mids, at the prompting of one of my students, I began to look at how a momentum indicator could help confirm the pattern and price position.

It took a couple of years to work out practical strategies for a momentum indicator to be a part of a real- world trading plan.

Then, several years ago, I started working with momentum strategies using multiple time frames and was blown away with how valuable they could be as part of the trading plan, to identify trade direction and trade execution and to confirm a potential price reversal at price or time targets. Like everything I teach in this book, these strategies can be used for any time frame and any market, from day to position trading. I first teach the concept and application of a momentum strategy using two time frames.

Later I give examples of how to use more than two time frames, but two are all you need. You will learn how to integrate this strategy into your trade plan. It is that simple and logical. If you are a position trader looking for trades that last from several weeks to months, you will use weekly and daily momentum trends. If you are a swing trader looking for trades that last a few days, you will use daily and hourly data.

Day traders will probably use minute and minute data or even smaller time frames. We know the momentum trend will not always be in the direction of the price trend. But a good indicator with the right lookback period will usually trend in the direction of price and reverse within a very few bars of the price reversal.

When price and momentum diverge, as in the case of a bullish price trend and bearish momentum trend, the larger time frame bearish momentum will keep us out of trades when the price trend is slowing down. The specific trade strategies you will learn in a later chapter will usually keep you out of a trade when the momentum trend is diverging with the price trend, which, at the least, will limit losses on losing trades. And remember, you will have losses, so a trade strategy that minimizes losses on losing trades is essential for trading success.

Are there any high probability forex trading strategies around? So what percentage success are we talking about here? As a matter of fact, nobody can tell you what percentage of trading success rate would count as high probability trading.

But that fact is they are very few or very rare indeed. In my humble opinion, I believe that these two things below make or form high probability trading setups:.

Well, in terms of support and resistance levels, these levels stand out. Every Tom, Dick and Harry traders in the world can see it. The big financial institutions that trade the forex market can also see it.

So the natural human response kicks in and prices behave predictably when it hits levels of support or resistance. Now, I also am of the opinion that support and resistance levels you see on smaller time frames are not as important as those seen on the larger time frames. Therefore, the larger time frames play a significant role in this argument that high probability trading setups happen in them. I will show you a few examples of how prices react to support and resistance levels on larger time frames so you will understand what I talking about and I may just turn you into a believer.

This first chart below is of GBPUSD on the monthly time frame and what is important to note here is the fact that:. So what is the best way to trade these high probability trading setups that happen in the larger time frames?

Now, I said previously that trading setups that happen in the larger timeframes take a lot of time to form…years even. With that, the chances of trade setups forming frequently in any of these 20 plus currency pairs increases, but regardless, its still going to be a long wait.

Well, it think you need to separate the high probability trading in larger time frames from your daily or regular trading activity. So essentially, its like a two separate trading really. So when the time comes and a trading setup in the larger timeframe is forming, how do you actually take the trade then?

SALE OFFER!!! The trade strategies you will learn in this book may be used for any actively traded market and any time frame. Stocks, exchange-traded funds ETFs , futures, and Forex examples are used. The same market structure is made day in and day out in all of these markets and in all time frames, from monthly to intraday data.

If an example is not a market or time frame you typically trade, ignore the symbol and focus on what is to be learned. The strategy taught will apply to all markets and time frames.

The objective of any trade strategy is to identify conditions with a high probability outcome and acceptable capital exposure. You will learn the four main factors of any market position and how to identify if each is in a position for a high probability outcome. When a market is set up for change from four different perspectives, the trader has an enormous edge, much more so than if only one or two of the factors are in the same position.

To win in the business of trading, just as in any other business, you must have an edge. The edge you learn in this book is to recognize when a market is in a position to complete a correction or a trend so you can enter a trade at the end of a correction in the direction of the trend or in the very early stages of the new trend and sell in the very late stages often within one or two bars of the low or high.

Just as a farmer must know the optimal time to plant and harvest a crop, the trader must know the optimal time to buy and sell a position.

Buying or selling too early or too late can result in, at worst, unacceptable losses or, at best, not maximizing the return from a position. The trader must clearly understand the relevant information about the market position to recognize the optimal conditions to buy or sell.

Markets can seem very complex. The plethora of relatively inexpensive trading software available with hundreds of studies and indicators can overwhelm a trader with often conflicting information, making it difficult to focus on the relevant information needed to make a confident trade decision.

The high probability approach taught in this book recognizes four market perspectives: multiple time frame momentum, simple pattern recognition, price reversal targets, and time reversal targets. The information from any one of these four perspectives could be overwhelming.

But in this book, you will learn how to focus on just those few bits of relevant information from each perspective that should quickly identify both the market position and whether a market is in a high probability position for a trade. I rarely do live workshops, but when I do I present a special exercise at the end of the session.

I tell the students that I can apply what I have taught them to any symbol, including stocks, ETFs, futures, or Forex, and it will take three minutes or less to process all of the information needed to identify whether the symbol is in a high probability position for a trade setup or what that particular market must do to become a high probability trade setup.

I have the students write any symbol on a piece of note paper. We collect them in a hat and I draw them out one by one. In less than three minutes, I apply everything I have taught them and arrive at a conclusion what is the probable market position of the symbol and the specific trade strategies. You, too, will be able to do this after you have studied this book and viewed the CD examples.

If a trader focuses on just the limited, relevant information needed to make a high probability trade decision, the chance of success is great. The MTF Momentum Strategy is a key factor to the trade plan that identifies high probability trade setups with minimal capital exposure. If you are always trading with the trend, you should mount up some very impressive gains.

It is easy to show a trend on any chart long after the trend is established. But how do we identify trend direction in the early stages? How do we identify when an established trend is in the later stages and in a position to make a trend reversal?

Without some approach to help identify where within the trend the market likely is, typical trend analysis will usually be too early or too late to be useful over time. It is easy to fill a book with after-the-fact examples of trends.

Trendlines, moving av- erages, channels, momentum indicators, and many other techniques can show the trend on historic data. Unfortunately, none of these techniques can reliably alert you to the beginning stages of a new trend or whether a trend is in its final stages. They can only identify an established trend, usually long after the trend is established and the optimum entry is long over. I know, we could say that a trendline break indicates a trend is complete and a rever- sal has been made.

For every trendline break that follows a trend reversal, I can show you a trendline break fake-out that is followed by a continuation of the prior trend.

Moving average crossovers are notorious for false trend reversal signals. In fact, most methods of identifying a price trend are doomed to failure for practical trade strategies with as many false reversal signals as confirmed ones.

This is a bold statement, but I believe it is true. I defy any trading educator to provide evidence that his so- called trend indicator consistently provides an accurate signal of trend position and trend reversal in a timely manner that a trader can take advantage of. How can I make this statement? What does a trendline, channel lines, moving average, or other indicator represent? Every moving average, channel, or indicator is based on historic price data.

It can only represent what has happened or what is the current market position relative to the lookback period. It has little predictive value in and of itself. It will always be a lagging indicator of the trend position, never a leading indicator of what is likely to happen in the future.

However, let me make you this promise and this challenge. Name a trend in- dicator and for any market or any time frame that you are given an example of how it defines the trend, I will show you two examples where it quickly failed.

Every one of these techniques, whether a trendline, volatility channel, moving aver- age crossover, or momentum indicator, can be a useful part of a comprehensive trading plan, but none of them alone will be of much use in and of itself to identify the probable trend direction for a future period.

Over and over again, you will find that price rever- sals do not coincide with the trend indicator reversals. As I mentioned earlier, for every after-the-fact, well-chosen example given, I will quickly find at least two where the trend indicator did not work to identify a trend reversal in a timely manner. However, there is a way to use some of these indicators to identify high probability trade setups.

In this chapter, you will learn how to use just about any momentum indicator as a trend indicator for trade direction in a unique but very logical way that you have probably not been taught before.

We are not concerned with identifying the exact price-swing high or low of a trend. Rather, we are concerned with identifying trades in the direction of the trend, including near the early stages of the trend and avoiding the later stages. The Multiple Time Frame Momentum Strategy that you are about to learn is the most powerful strategy to filter any market for trade direction and trade execution setups. Not only do I believe the Multiple Time Frame Momentum Strategy is the best use of an indicator for trading strategies, I believe it is the only practical indicator strategy for real-world trading.

I use the term capital exposure to describe what many trade educators call risk. Risk is the probability of an event happening. Capital exposure is the amount of money capital that may be lost if a market moves against you. I have much more to say about capital exposure later in the book.

In the world of trading, there are hundreds of momentum indicators also called oscil- lators. Most of these indicators use the same information, the open-high-low-close of a price bar, and represent about the same thing, the rate-of-change of price.

There is nothing mysterious, magical, or unique about this. All price indicators look back over a given period, called the lookback period , crunch the price data, and compare the recent price position with the price position of the lookback period. Different indicators manip- ulate and display the output differently, but all price-based indicators represent about the same thing: the rate-of-change or how fast the price trend is moving. The indicator reversals represent the change in momentum—the increase or decrease in the rate-of- change of the price trend.

That is why you can use almost any price based indicator for the Multiple Time Frame Momentum Strategy you will learn in this chapter. The first and most basic concept is this: Momentum indicators do not represent price trends.

Momentum indicators represent momentum trends. If it did, this book would be about three pages long because all we would have to do is reverse our trade position each time a momentum indicator makes a reversal, and we would compound money faster than rabbits on Viagra can reproduce. Unfortunately, it is not that easy. Price and momentum do not always trend together.

For example, a momentum indicator may make a bearish reversal and decline while the price trend continues to advance. How can it do this? The rate-of-change of the price trend is decreasing even though price continues to advance. The bullish trend is just slowing down, so the momentum indicator is bearish even though the price trend con- tinues to be bullish. The outcome: The price trend and momentum trend run opposite of each other. Let me repeat this basic and very important concept about momentum indicators: Momentum indicators represent momentum trends, not price trends.

Never expect price to reverse when the indicator makes a reversal. Often both price and momentum reverse together, but sometimes they will diverge because the price trend is only slowing down, forcing the indicator to reverse. So let me repeat it one more time: Momentum indicators represent momen- tum trends, not price trends. Price and momentum may not trend in the same direction.

Not every momentum reversal will coincide with a price reversal. We can only make money on price trends, at least until someone comes up with a momentum contract to trade!

Even though momentum and price trends often do not move in the same direction, you will soon learn how we can use momentum trends in a simple and practical way as the primary indicator of trade direction and trade execution setups. You will also learn how, by incorporating dual time frame momentum trends in a comprehensive trading plan that also includes the time, price, and pattern position of a market, you can identify whether the market is at or very near a price trend reversal.

For at least the first 10 years I traded, I never used an indicator. I was basically a pure chartist using time, price and pattern position to identify trade setups and targets. My strategy was based on Gann, Elliott, and Fibonacci. In , I released what I believe was the first futures trading home study course, called the W.

Gann Home Study Trading Course , based on Gann, Elliott, and Fibonacci trade strategies. This course is no longer available. I studied a lot about indicators and discovered I could always find an indicator or make a change in a lookback period or other setting for the indicator to confirm whatever price trend bias I had.

Around the mids, at the prompting of one of my students, I began to look at how a momentum indicator could help confirm the pattern and price position. It took a couple of years to work out practical strategies for a momentum indicator to be a part of a real- world trading plan. Then, several years ago, I started working with momentum strategies using multiple time frames and was blown away with how valuable they could be as part of the trading plan, to identify trade direction and trade execution and to confirm a potential price reversal at price or time targets.

Volume indicates strength When I see a high volume move, I will always look for a pullback because chances are, that it will move even higher. The key to momentum strategies is to use at least two time frames—a larger time frame to identify trade direction, and a smaller time frame for trade execution setups. I can say that this stock is on an uptrend, and I can look for setups to create my plan and find my entry. You draw a trendline against the initial move and as soon as is broken you build up a position and take the first profit at the high of the initial move or at the low of the initial move when playing to the short side. But before you go any further, you need to understand what high probability trading is.

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