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Multiple Time Frame Momentum Strategy

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FIGURE 2.2 Bullish and Bearish Momentum Reversals Coincide for Two Indicators

Near the high point of this data, the price trend continued to a new high, but the momentum trend made a bearish reversal and declined as price continued higher. How can this happen? The rate of price advance slowed down even though the price continued higher. Most price-based momentum indicators represent the speed of the trend, and the speed of the trend slowed down here, so the momentum was bearish even while price made a new high. Let’s take a look at one more price-momentum divergence example. Figure 2.4 is a 60-minute EUR/USD Forex chart. I’ve drawn the arrow lines to show a period when price and momentum diverged. Price continued higher, while momentum declined. Why? The rate of the advance slowed down even through price continued higher, which caused the momentum to be bearish for a while. Every indicator will diverge with price now and then. This is why I challenge any of the indicator junkies to prove any trading system consistently profitable based on any single indicator for any market. I’ve done it again—put out another challenge, and here we are still near the beginning of the book. I can’t help it, because I see and read so

Profile for ERIC  Hunt

(wiley trading) robert c miner high probability trading strategies entry to exit tactics for the for  

(wiley trading) robert c miner high probability trading strategies entry to exit tactics for the for  

Profile for erichunt
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