Frame Momentum Reversals

Rule 1:
The key to momentum strategies is to use at least two time frames—a larger time frame to identify trade direction, and a smaller time frame for trade execution setups. We only want to take a trade if at least two time frames of momentum are moving in the same direction. That ups the odds big-time for the trade to be successful. This is such a simple and logical strategy that it should be a part of everyone’s trade plan.

If a trader only considers the momentum position of one time frame, he is at a great disadvantage. Momentum may trend consistently without making any reversals, but during that momentum trend, price will usually make corrections, sometimes sizable ones, without the momentum making a reversal. Or the speed of the price trend will ebb and flow without causing a momentum reversal. Wouldn’t it be best to be able to identify during the price trend when either a minor correction is likely to be complete or the speed of the trend might increase? That is what is accomplished by using the Dual Time Frame Momentum Strategy.

DTF Momentum Rule 2: A trade execution may be made following a smaller time
frame momentum reversal in the direction of the larger time frame momentum
trend.

The initial conditions for trade entry are met when the smaller time frame momentum
makes a reversal in the direction of the larger time frame momentum trend. That
gives us the best shot for the price trend making the biggest moves with minimal capital exposure.