How to combine the Momentum indicator with the EMA to trade CFDs


momentum and ema strategy olymp tradeTraders often use technical indicators to discover the best places to open transactions. There are plenty of indicators available on the Olymp Trade platform. Some of them are good as stand-alone tools, others work better in combinations. Today we are going to discuss a trading strategy for CFDs that joins the Momentum with the Exponential Moving Average.

How to set the Olymp Trade chart

Log in to your trading account and choose the instrument you are going to trade during this session. Define the timeframe. This strategy gives the best results on the 30 minutes or longer timeframes.

Now, click on the indicators icon and find the EMA. Add it to the chart and choose the period of 20. Then repeat the procedure to attach the Momentum indicator as well.

On the Olymp Trade platform, the Momentum indicator consists of 2 lines. The first one is the momentum line. The other is the moving average of the momentum line. We don’t need them both. In order to have just one line in the momentum indicator window, I have set the momentum period to 20. Then I’ve set the moving average period to 1 and made its line a bit bolder. This way on my chart only one line is visible. It is MA of momentum, but having the period set to 1 it is actually the same line as momentum. See the picture below.

My settings for the Momentum indicator on Olymp Trade
My settings for the Momentum indicator on Olymp Trade

Trading CFDs with the Momentum and the EMA indicators

You have two indicators added to your Olymp Trade chart. All you need to do is to analyse how they move and to open trade when the signal is produced. And what are the signals for the long and short positions?

The EURUSD chart with EMA(20) and Momentum(20)
The EURUSD chart with EMA(20) and Momentum(20)

A signal to open a long position on Olymp Trade

The Momentum is oscillating around the 100 line. It should cross this line moving upwards in order to use it as a signal to open a long position. Moreover, a candle ought to close above the EMA line. The strongest signal is when these two events happen simultaneously, however, 1 to 3 candles difference is also acceptable.

Long position example with EMA and Momentum
Long position example with the EMA and the Momentum

A signal to open a short position

The opening of a short position should be done when the situation on the chart is quite opposite. The Momentum indicator should move downwards and cross the middle line. At an identical time (or within 1 – 3 candles) a candle should close below the line of the EMA indicator. Now, you can enter a sell trade.

Short position example with EMA and Momentum
Short position example with the EMA and the Momentum

The length of your position depends on the occurrence of an opposite signal. That is when the Momentum indicator comes back to the 100 line and when the candle closes below (for long positions) and above (for short trades) the EMA line.

Summary

A strategy that combines the Momentum and the EMA indicators is not really complicated. It requires, however, there is a visible trend in the market. Avoid using it when the price is moving sideways.

You can utilise this strategy regardless of your level of trading experience. You just need to add two indicators to your Olymp Trade platform and await the signals.

Two conditions have to be met for a signal to be a reliable one. The first is the Momentum line, which should cross the middle line on the way up or down. The other condition is that the candle closes above or below the EMA line.

You can hold the position open as long as you do not receive a signal to do otherwise. This signal is produced when the Momentum moves back to the middle line and the candle closes either below or above the EMA.

Open the Olymp Trade demo account and practice using the Momentum + EMA strategy. Move to the real account when you feel confident enough to make some real profits.

I encourage you to share your opinion on today’s strategy in the comments section. You will find it further down the site.

Good luck!

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