Momentum Trends - Trading Parabolic Price Trends

What's a Momentum Trend?A momentum trend is a trend that has more momentum than the previous one: this new trend can be drawn using a much steeper trend-line than the one that was in place before. When a new trend line forms that's much steeper than a previous one we say that the market trend has gained extra momentum & becomes much stronger. These types of trading set-ups require a different type of market technical analysis.

In the example below: Also when the price is moving upward within a channel, if it breaks the upwards channel a stronger trend is formed as illustrated in the diagram below. If as a trader your price chart breaks an upward trend-line to the upside in an upward moving market like the one below, Don't Try to Sell, Buy More Contracts, Remember this XAUUSD trading tip it can make you a lot of money just like the way it did in the trading analysis below.

Momentum Price Trend - Channel Break Upwards - More Momentum on Upward Trending Market

Using the same technical analysis example above we can also see how new steeper trend-lines were formed showing the trend was gaining momentum.

This is shown by the steeper trend lines which can be drawn as the market price movement progresses.

The newly formed upwards trend has more momentum than the previous one as illustrated by the formation of the steeper trend line.

This new trend forms trend B and C as illustrated in the diagram below drawn using the MT4 trading analysis software, the momentum added a new steeper trend-line as drawn on the market price chart.

This is shown in the example below by the three trend-lines A, B & C showing formation of stronger market trends as the market continues to gather momentum.

XAUUSD Price Gaining More Upward Momentum

However, when the steepest trend-line is broken then even all the others will most likely be broken too. It is best to take profit once the steep most trend-line is broken.

This strategy also can be used by short term Gold traders like the day traders or the scalpers, this pattern will frequently form on the 5 minute and 15 minute Gold price chart. These parabolic trend-lines can be used to know where to set take profit order. A trader should immediately book his profit as soon as the steep most line is broken.

How Do I Trade These Momentum Price Trends Setups

The momentum trend lines are good trading tools for determining where to takeprofit early before other traders. This momentum trading set-up occurs frequently on 1 minute, 5 minute and 15 minutes trading charts and thence suitable for scalpers and day traders. For day trading which is most common the best chart time frame to use is the 15 minutes sometimes the five minutes, for example after entering a short term trade either a buy/sell trade and the market moves some pips in your favor and you spot this pattern then it is best to exit once the steep most line is broken and take profit at that point.

Technical Analysis Example

For this example we shall use the short term chart - the 5 minute trading chart for drawing these trading set-up, when the setup appeared as below, it was a good point to takeprofit.

Trading the Momentum Market Moves

In the above example a trader trading long would have waited until the steepest trend-line was broken & then closed their buy trade - taking profit at this point thus earning a profit of on this buy position. The trader would have exited the trade at the best time and thus avoided the sideways market that followed.

Parabolic Trends - What is it?

Sometimes market prices move in a parabolic manner, & this is seen when panic buying sets in and price of Gold is driven vertical. During a parabolic upwards move, there is almost a complete absence of sellers, which creates a vacuum of buying. When this occurs, traders dash just to get in to the market regardless of price, in fear of being left behind. This parabolic trends can make the largest price moves in the shortest amount of time, traders will just keep placing buy orders in this setup.

For this type of move it's best to keep buying - no need for technical analysis just keep buying.

This trend will last for months on end even up to 2 years, for this time just keep buying and as long as those weekly and monthly trend lines are holding just keep buying and buying.

When the price of a Stock or a Currency pair or Gold moves in this way, the highest point that is reached often marks the end of that upwards move with prices not returning to the ultimate highs again for a long time. When this point is reached & the most steepest trend-line is broken it's best to consider that as a price trend reversal & it is best to take time off the market and enjoy your profits for a while before calculating your next move.

The same can also happen for a downward trend when there's panic selling and price is also driven vertical. This especially happens during recession when the prices of commodities keep bidding lower & lower.

The steeper a trend-line angle, the less reliable it becomes. When the steepest trend line is broken it's best to exit this buy trade transaction. The example below is for crude oil chart that formed a parabolic setup.

Parabolic Price Trend

As a trader if you come across a parabolic trend in an upwards trending market just keep buying & buying some more - you will make a lot of profits, there will be no added trading analysis required just the trend-lines. The only thing to remember is to exit once the steepest trend line is broken because the reversal on this trading set-up is very fast you need to also be very fast. Just make sure you exit at the correct spot just like in the above example.

For example, the above parabolic movement is of crude oil trading chart, the traders had managed to drive the price of crude oil from $70 to $150 over a period of a couple of months & at the top of the market those that call themselves trade analysts were so bullish that they forecasted the market price of crude oil would hit an all time high of $200, what these analysts did not know this concept of parabolic trend a.k.a Vacuum buying, in technical analysis market trading as long as the trend lines held the direction of the market was upwards, but even after the first steepest line was broken the analysts kept insisting the price would hit $200 dollars, guess what, after the most steep trend-line was broken it didn't even take two weeks to take the market price of oil, back to $50 at one time it was even $35 dollars. That is parabolic trading analysis, now you know.

Another example of parabolic price move is Gold that formed on the weekly/monthly chart during the same period shortly after the steepest line in the crude oil chart was broken. You can open the XAUUSD chart and use the Weekly & Monthly chart timeframes to try and spot these parabolic trend setup of XAUUSD prices.

Good examples of this setup on charts is the weekly & monthly price charts for XAUUSD & Crude Oil, these trade charts can be found on MetaTrader 4 platform depending on your online broker.

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