Momentum Trading Strategy [2025 Guide]

Summary

In this video, the focus is on a breakout and retest trading strategy, designed for forex traders to improve their entry precision. The strategy emphasizes understanding market structure, identifying momentum, and using Fibonacci levels for optimal entry points. Traders are encouraged to trade during the London and New York sessions, utilizing specific indicators like the session chart and Fibonacci retracement levels to find entry opportunities. The video highlights the importance of focusing on a single pair and timeframe for better performance while offering insights into three core entry models, including breakout, supply and demand, and liquidity sweeps.

Takeaways

• 😀 Analyzing more data often leads to decision paralysis and fatigue, rather than improving trading outcomes.
• 😀 Humans have an innate desire for control, which leads to over-reliance on too many indicators and data.
• 😀 The best trading solution is to focus on two key indicators: price momentum and the optimal entry point.
• 😀 Market conditions can either be trending (up or down) or ranging (sideways), and both phases are cyclical.
• 😀 The market will not trend or range forever; eventually, trends exhaust into ranges, and ranges will eventually break into trends.
• 😀 There are three core entry models in trading: breakout and retest, support/resistance (supply/demand), and liquidity sweep.
• 😀 Breakout and retest is the focus of this lesson; it involves trading after a price breaks out of a range and retests a reference level.
• 😀 Use the first four hours of the Tokyo session to mark high and low points for the Asian range, and use these as reference points for trades.
• 😀 Fibonacci retracement levels (60%, 70%, 80%) can help identify optimal entry points after a breakout.
• 😀 It's important to trade on the 15-minute time frame and focus on one pair, one pattern, and one time frame for consistent performance.
• 😀 While this breakout and retest strategy works most of the time, it's not foolproof, and traders should also be aware of other entry models such as supply/demand and liquidity grab.

Q & A

What is the primary issue with analyzing too much data in trading?

The primary issue is that analyzing more data can lead to decision-making paralysis. It causes fatigue, making it harder to take action, and may result in random, uncalculated trades instead of focused, strategic decisions.

Why do humans struggle with trading and decision-making under uncertainty?

Humans are wired to seek control and certainty, and the unpredictability of trading can feel threatening. Our primitive brains are not accustomed to thinking in terms of probabilities or dealing with things beyond our control, making trading challenging.

What are the two main indicators to focus on when trading according to the script?

The two main indicators to focus on are the momentum of price movement (where the price is headed) and finding the optimal entry point for trades.

What are the three core entry models in trading?

The three core entry models are: 1) Breakout method (trading a breakout after price moves beyond a specific range), 2) Support or resistance (supply and demand zones), and 3) Liquidity sweep (when price moves beyond a previous high or low and reverses).

What is the breakout and retest method, and how is it applied?

The breakout and retest method involves identifying a breakout from a range, then waiting for the price to return (retest) to a key level before entering a trade in the direction of the breakout.

How does the 'sessions on chart' indicator help with trading?

The 'sessions on chart' indicator marks key trading sessions (Tokyo, London, New York) on the chart, which helps to identify the best times for entering trades based on market activity and momentum.

What is the role of the Fibonacci retracement tool in identifying optimal entry points?

The Fibonacci retracement tool helps identify optimal entry points by marking potential reversal levels during price pullbacks, specifically between the 60% to 80% retracement levels after a breakout.

What are the recommended timeframes and pairs to use for this strategy?

The strategy is best applied to the 15-minute time frame and can be used on major Forex pairs, although it is not recommended for trading commodities like gold. Sticking to one pair and one pattern on the 15-minute chart is emphasized for better performance.

How can you filter out unsuccessful trades using this strategy?

You can filter out unsuccessful trades by focusing on the first two hours of the London or New York sessions, ensuring that the price is not already showing signs of exhaustion or having already swept key levels.

Does this trading strategy work every time?

No, this strategy does not work every single time, as there are various factors that can affect the market. However, it provides a structured approach that has proven to be effective in many cases, especially when combined with other trading methods.