Momentum Oil Trading Trends
What is a Momentum Trend?
A momentum oil trend is one that has more strength than the earlier one, it can be plotted using a much steeper oil trend line than the one that was in place before. When a new line forms that is more steeper than a previous one we say that the oil trend has gathered extra strength and becomes much stronger. These types of set-ups require a different type of analysis.
In the crude oil trading example explained below: Also when crude oil price is moving upwards within a channel, if it breaks the upward channel a stronger oil trend is initiated as shown in the diagram below. If as a trader your trading chart breaks an upward oil trend line to the upward side in an upward direction moving market like the one below, Do not Try to Sell, Buy More Contracts, Remember this oil trading tip it can make you a lot of money just like the way it did in the trading analysis below.
Channel Break Upward - More Momentum on Upwards Market Movement
Using same technical analysis examples above we can also see how the new steeper trend lines were initiated showing the oil trend was gaining strength.
This is shown by the steeper trendlines that can be portrayed as the crude oil price progresses.
The newly shaped oil trend has more strength than the earlier one as shown by the formation of the steeper trend line.
This forms oil trend B & C as shown in the diagram below drawn using the MT4 technical analysis software, The momentum added a new steeper line as plotted on this chart.
This is illustrated in the crude oil trading example explained below by the three lines A, B and C showing formation of stronger trends as the crude oil market continues to gather strength.
Oil Trading Price Gaining More Strength
However, when the steepest oil trendline is broken then even all the others trend lines will most likely also be broken too. It is best to take profit once the steep most trend line is broken.
This technique can also be used by short-term oil traders like the day trader or the scalper, this pattern will oftenly form on the 5 minute & 15 minute chart. This parabolic trendlines can be used to know where to set take profit. One should immediately take his profit as soon as the steep most trend line is broken.
How to Trade These
The momentum oil trendlines are good analysis tools for figuring out where to set take profit early before other traders. This momentum trading setup occurs frequently on 1 minute, 5 minute and 15 minutes charts & therefore suitable for scalpers & day traders. For day trading which is most common? - the best chart to use is 15 mins sometimes 5 mins, For example after entering a short term trade either buy/sell and the crude oil market moves some pips in your favor and you identify this pattern then it's best to exit once the steepest trendline is broken and take profit at that point.
Technical Analysis Example
For this example we shall use short term trading chart of minutes for plotting, when the set-up appeared as below, it was a good point to take profit.
Trading The Momentum Market Moves
In the above example one trading long would have waited until the steepest trendline was broken then closed the trade & taking profit at this place thus making a profit of 42 pips on this buy oil trade. The trader would have exited the trade at the best time & thus avoiding the choppy oil market that followed.
Parabolic Trends
Sometimes a market moves in a parabolic formation, and this is seen when panic buying sets in and oil prices is pushed vertically. During a parabolic up move, there is almost complete absence of bears, which initiates a vacuum of buying. When this occurs traders scramble to just get into the crude oil market regardless of oil price, in the fear of being left behind. This can make the biggest crude oil price movements in the shortest amount of time, traders will set buy trade orders in this oil trading setup.
For this type of move it is best to keep opening buy - no need for analysis just keep opening buy.
This oil trend will last for even months on end even up to 2 years, for this time just keep buying & as long as those weekly and monthly oil trend lines are holding just keep buying & buying.
When oil moves in this manner, the highest point which is reached often symbolizes end of a move with oil prices not going back to the ultimate highs again for a very long time. When this level is reached and the most steep most oil trend line is broken it's best to consider that as a oil trend market reversal & it is best to take time out off the crude oil market and enjoy your profits for a while before calculating **what's your next move.
The same can also happen for a down oil trend when there is panic selling and crude oil price is also driven vertical. This especially happens during recession.
The steeper a oil trendline angle, the less reliable it becomes. When the most steep is broken its best to get out of this trade position. The example explained below is for crude oil that has initiated a parabolic pattern. Another example is oil that formed on the weekly/monthly chart during the period shortly after the steepest line in the crude oil chart was broken.
As a trader if you come across a parabolic oil trend in an up direction just keep buying & buying some more and you'll more likely to make profits trading this market trend direction, there will be no added technical analysis required just the trendlines. The only thing to remember is to get out once the steepest line is over because the reversal on this crude oil trading setup is very fast you need to also be very fast. Just make sure you exit at the correct point just like in the above examples.
For example, the above parabolic movement is of crude oil chart, the traders had managed to drive the crude oil price of oil from $70 to $150 over a period of a couple of several months at the top of the crude oil market those who call themselves analysts were so bullish they predicted the crude oil price of oil would get to a high of $200, what these analysts did not know this concept a.k.a Vacuum buying, in technical analysis market trading as long as the oil trend lines held the direction of the market was upward, but even after the first steepest trendline was broken the market analysts still kept insisting the crude oil price would hit $200, guess what, after the most steep trendline was broken it did not even take two weeks to take the crude oil price of oil, back to $50 at one time it was even $35. That is parabolic technical analysis, now-you-knownow-you're-informed.
Good examples of this crude oil trading pattern on charts is the weekly & monthly crude oil price charts for Oil Trading and Crude Oil Trading, these charts can be found on MT4 crude oil trading platform depending on your online broker.
