Momentum Pinball trading strategy was developed by Linda Bradford Raschke, a famous American trader. This strategy is aimed to use so-called overbought and oversold moments of the market. This factor is successfully used in many trade strategies.
Before reading the article and writing your questions in the comments section, I recommend to watch this video. It’s not long but covers the biggest part of questions on the topic.
- Market: Forex;
- Currency pairs: GBPUSD;
- Timeframe: H1, Daily;
- Forex indicators: Momentum;
- Strategy: intraday;
- Protective orders: StopLoss, Tralling Stop.
MOMENTUM PINBALL STRATEGY INSTALLATIONS
So, what is the way overbought and oversold conditions are used in this strategy? First of all, it should be mentioned the main timeframe is day in Momentum Pinball. I.e. search for an entry point starts with its analysis. How does this happen? This strategy is very easy to learn and use – it’s necessary to use just one indicator – Momentum (3, 1), while additionally using levels 30 and 70.
MOMENTUM PINBALL TRADING SIGNALS
The example shows the indicator crossed level 70 on the candle, which is marked by a red vertical band. This tells us about the overbought state at the end of the day. Therefore, we must consider this situation to open a short, i.e. we must sell.
After seeing the signal at the end of the day on the daily chart, it’s necessary to pass to the hourly chart. We need to analyze the whole first candle on the hourly chart, i.e. it’s required to wait for the first hour to close. After closing the first hour of the day, there is placed a pending order.
After closing the first candle on the hourly chart, it’s necessary to place an order (in this case short) 10 points far from the minimum (for short) or maximum (for long) of this candle. Stop-loss will be located on the opposite side also 10 points far from the minimum (for short) or the maximum (for long) of the same candle.
Trade must be closed at the end either of the first or the second day after the trade opening. Trade should not be held for more than two days. Trailing stops may be used at the trader’s wish, but it is better to refuse from using less than 50 points since a smaller trailing stop can break off profitable trades.
Momentum Pinball strategy works well, but it has the following feature: the trades are opened not very often. However, despite this fact the traders will get profit if trading on this strategy. So, its application will depend on the trader’s personal qualities.