In this article, we'll take a look at strategy that does just that: the Five-Minute Momo Trade.
What's a Momo?
The Five Minute Momo Trade looks for a momentum or "momo" burst on very short-term (five-minute) charts. First, traders lay on two indicators, the first of which is the 20-period exponential moving average (EMA). The EMA is chosen over the simple moving average because it places higher weight on recent movements, which is needed for fast momentum trades. The moving average is used to help determine the trend. The second indicator to use is the moving average convergence divergence(MACD) histogram, which helps us gauge momentum. The settings for the MACD histogram is the default, which is first EMA = 12, second EMA = 26, signal EMA = 9, all using the close price. (For more insight, read A Primer On The MACD.)