TMA Momentum Cross Forex Trading Strategy

Other traders, on the other hand, like to trade just when the market reverses and develops a new trend. As a result, they would employ a trading method that would assist them in identifying potential trend reversals. Trading in this manner is often regarded as risky because it implies that you are trading against the previous market flow and that the new market trend direction has not yet been clearly established. However, when trading in this manner, it also allows traders to maximize their profits. This is due to the fact that they frequently trade at the start of a trend and exit at the end of a trend.

Some of the most prevalent types of trend reversal methods include crossover strategies. It is a straightforward strategy for trading trend reversals based on the crossing of moving average lines. Despite its simplicity, many traders fail while trading crossover methods. This is usually due to the fact that they blindly follow crossover strategies without considering the characteristics and behavior of the current market condition.

TMA Momentum Cross Forex Trading Strategy assists traders in identifying and confirming probable trend reversals using a set of rules based on highly reliable technical indicators. It also takes into account the price action as well as the candlesticks themselves.

Three Color MA

Three Color MA is a moving average-based bespoke technical indicator.

Moving averages have two major drawbacks. The first is that most moving averages lag. This means that most moving averages react to price changes very late. Moving averages that move too erratically are at the other end of the spectrum. These moving averages tend to move even with minor price changes.

Three Color MA is a modified moving average that smoothes out its moving average line, making it less prone to misleading signals in choppy markets and more responsive to recent price changes.

The line drawn by the Thee Color MA indicator changes as well. This makes it easier for traders to identify market cycles.

TMA Slope

TMA Slope is yet another unique technical indicator based on moving averages. It’s also an oscillator indicator that displays bars and dots in a separate window.

TMA Slope is calculated by determining the slope of a Triangulated Moving Average (TMA) line. This is based on the speed difference between a fast and slow moving TMA line. The indicator then displays the difference as histogram bars in a separate window. A bullish trend bias is indicated by positive green bars, while a bearish trend bias is indicated by negative coral bars.

The indicator additionally displays dots that are connected to the histogram bars. It plots aqua dots to show bullish momentum and red dots to show negative momentum. Positive aqua dots indicate a bullish trend that is strengthening, while positive red dots indicate a bearish trend that is weakening. Negative red dots, on the other hand, indicate a strengthening bearish trend, whereas negative aqua dots indicate a weakening bearish trend.

Trading Strategy

This is a crossover trading method that uses the 30-period Exponential Moving Average (EMA) line and the Three Color MA line as its crossover trading signal.

Instead of trading every signal that comes our way, we will filter transactions based on the intersection of the crossover and the TMA Slope indicator. The crossover of the 30 EMA line and the Three Color MA line should coincide with the TMA Slope indicator’s trend direction.

Then, using price action features, we should discover high probability trade setups. Instead of entering the trade immediately when the two lines cross, we will wait for price to retrace into the area of the moving average lines. Then, we should wait for a momentum candle to move in the direction of the trend, indicating that price is more likely to move in the direction of the newly formed trend.

Indicators:

• Three_Color_MA
• 30 EMA
• Tma_slope_nrp_alerts

Preferred Time Frames: 30-minute, 1-hour, 4-hour and daily charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

• Price action should cross above the 30 EMA line and the Three Color MA line.
• The TMA Slope line should become positive.
• The Three Color MA line should cross above the 30 EMA line.
• Price action should retrace towards the area of the moving average lines.
• A bullish momentum candle should be formed as price action rejects the area of the moving average lines.
• 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 price closes below the 30 EMA line.

Sell Trade Setup

Entry

• Price action should cross below the 30 EMA line and the Three Color MA line.
• The TMA Slope line should become negative.
• The Three Color MA line should cross beow the 30 EMA line.
• Price action should retrace towards the area of the moving average lines.
• A bearish momentum candle should be formed as price action rejects the area of the moving average lines.
• 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 price closes above the 30 EMA line.

Conclusion

This method employs numerous concepts that traders employ to identify trend reversals. The first indicator is the crossing of the moving average lines. Then there’s price action, which is defined by how it tends to make higher highs in an uptrend and lower lows in a decline. This is consistent with price activity rejecting the moving average line area. Finally, consider the slope of moving average lines. The TMA Slope indicator simply assists us in determining the slope of the moving average lines objectively.

Combining all three concepts results in trade setups with higher probabilities. These trade setups would produce positive results if used in the right market conditions.