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hi this is Alberto pal from my for ex , trading success.com speaking from London , UK cold winter night over here by the , way I'm heading to Sydney Australia , tomorrow so hopefully the weather is , going to be a bit more welcoming Down , Under , but anyhow today I'd like to speak about , a very simple momentum trading strategy , that is so simple that you can actually , just start implementing today the , strategy revolves around seven , principles or seven check boxes if you , can take all the seven boxes then your , probability of making profit by , putting on that trade is going to be , very very high and that's why I call it , a momentum trading strategy because as , you will see all those seven principles , are around making profit out of the , momentum that is in the market but let's , get going the first two principles are , number one trade with the trend as I , said this is strategy that will seek , to profit from the momentum in the , market so don't try and short an uptrend , and don't try and go long in a bearish , trend obviously simple I know and it may , sound obvious but way too often see , traders that get very badly burned by , going against the market or the trend , principle number two is you need to make , sure that when you consider putting on , the trade the moving averages are , Fanning and what does this mean it means , that the long medium and short term , moving averages must be diverging so if , we look at this example here and let me , at my highlighter you see that we have , the smooth and moving average which , is the day moving average then we , have the W day moving average and then , we have finally the five day moving , average well the fact that here the , three moving averages are Fanning which , is they're getting further and further , apart is a good sign it means that the , Sun that theatre-faction is increasing , in momentum because not just the three , averages are all going up but the short , term moving average is going up faster , than the medium and the long term one , which means that the price is gaining , momentum principle number three is that , the price must be near to buy or sell , zone sin two different time frames , this means that say you think you want , Togo long because the price is close to , a support level well you need to make , sure that the price is testing , successfully a support level in two , different time frames so for example a , five-minute time chart and a hourly time , char tall you need to do really is just , plot the price in two different charts , in two different time period sand make , sure that in both cases you're getting a , buy or a sell signal from that chart in , this specific example here if I want to , go long because I think that this is , actually a good test of the support , level Will need to make sure that this , relationship holds on two different time , frames principle number four is before , you Putin the trade you need to have a , small candle in the direction of entry , what do Oman well if I think that's an , uptrend and I want to go long , before I Putin the trade want to wait , and see a small bullish candle in this , specific case it's here let me highlight , it for you here okay , now what's been happening here is that , the price has been coming off and it's , been testing the support level and let's , say that principle 3 holds so we'vie , tested this support level in two , different time chart snow I want to wait , to have a small bullish candle as a , confirmation that the trend is reversing , and in this case I have it here , principle number five and this is going , to be the trigger for me putting on the , trade okay I want to enter the trade as , the next handle breaks the previous high , or previous low okay so as you may , remember here we had the test of the , support and here we had the small , bullish candle and here can notice , that the next candle is actually making , new highs okay let me just delete what , I'vie done here okay , and I can indeed notice that here this , is a new high and therefore that's a , further confirmation that the trend is , reversing okay so just to recap test of , the support level in two different time , frames here then a small bullish candle , here and then new high here principle , number six is to do with with once I , enter the trade where do I set the , stop-loss well I want to set the stop , loss at the opposite of the small candle , okay so in this specific case I want to , set the stop loss at this level , okay I'vie gone long here let me just try , and change the color so it's clear for , you , okay so I'vie gone long here and I , apologize if this is very small and I'm , going to set the stop-loss here , I can't increase the size on this it's a , real shame okay so what I'vie done here , is I'vie taken bigger size chart to , illustrate the point so we were having a , look at how I could set a good stop loss , level we'vie agreed that I'm going to set , a stop loss level here okay which is the , bottom okay what I have here is a zoomed , in version of the chart we had on the , previous slide we were analyzing how , principal number six is to do with , setting the appropriate stop loss level , and we want to set the stop loss level , at the opposite of the small candle so , in this particular case I want to set my , stop loss level here okay so just to , recap , I'vie got in at this level which is going , to be then which was the new high in the , price and my stop loss is here if the , Purple Line my entry level is the red , line now this is a follow upon , principle number six which is you don't , want to risk more than one percent of , your capital at any point in time so , we'vie said where to set your stop loss , in relation to your entry level and , we'vie also said you don'twat to risk , any more than one , percent of your capital so that means , that you need to solve for the notional , amount such that your maximum loss is no , more than 1% of your equity in terms of , the specific level you want to set the , stop loss and then obviously put the , order with the broker add one peep plus , half the bid-offer spread away what do I , mean if you get stop loss level of say , W euro dollar okay , and the bid-offer spread is say 2 pips , OK I want to set the order with the , broke rad effectively one point one nine , nine eight okay which is one paper way , plus half the bid-offer spread so the , bid-offer spread is two pips so I want , to set the order with the broker to pips , away from W that's essentially to make , sure that the price has really broken , through the stop loss level and it USN't , just broker playing games the last , principle principle number seven is , about setting the profit target or I , should say the profit targets you want , to set your first profit target at a , ratio of one to one reward risk which , means that if you are risking W pip son , your stop-loss you want to set your , target profit pip sin the money okay , so you're risking W pip sand you're , making W pips you only want to do this , for a third of your notional the second , third you want to set it at a ratio of , two to one reward to risk so if your , risk in Th your target profit is going , to be W pips away and finally you want , to let the third target profit , run until you get stopped out okay so if , you get the trend right obviously as the , market , moves in your favor you want to be , adjusting your stop-loss accordingly , okay and eventually you will see that , even if you get stopped out you're still , at a profit because the market went so , mu chin your favor that you have been , adjusting your stop-loss so your third , third third third of the notional you , want to let it run a frequently asked , question I get is why do you not invest , more than% Inuits trade some people go , as far as investing to% of their , notional remember no matter how , experienced you are handling losses is , psychologically difficult okay if you , trade a small amount and take the profit , off the table frequently it not only , increases your confidence but it keeps , your equity account curve in a smooth , nice slow uptrend and also remember as , your account size grows your 1% of your , account size will become a bigger and , bigger absolute dollar number just , couple of quick point son mastering your , trading psychology given that we , mentioned that handling losses is , difficult when you trade set your trades , in the system orders stop losses target , profits etc and then close the charts , and do something else go away the more , you look At char tor at a trade the , more you will start tinkering with it , and you will end up losing the focus and , what's happening in the big picture so , make sure you take all the seven bosses , but follow the seven principles make , sure you take all the seven boxes if you , do set your trades in the system and , then go away go do something Elsa , couple of other point son trading , psychology , set up daily routines the very few , people can trade on the fly and you see , that if you start using a routine and it , makes you money , as soon as you change your routine your , profitability will change that's a truth , that there is a direct link between your , trader routine and your profitability , and the goal is to find a routine that , makes you money there's a lot of brokers , nowadays that offer the ability to trade , on iPhone or some other smartphones , don't use it okay as I said very few , trader scan be completely focused and , trade on the fly it system means for , brokers to kind of get you away from the , competition which is like offering you , the latest technological gadget but if , you can stay away from those devices , this is all from me , Alberto today if you want to learn more , about foreign exchange and how you can , fast-track your way to profiting from , for ex trading make sure you join my , newsletter where I regularly give video , training's webinars articles and so on , and so forth if you're not there already , go to VIP dot my for ex trading success , comm and make sure you sign up today , that's B IP dot my for ex trading success , com I'll see you on the other side bye , bye