Momentum Trading Strategy

Many traders think it’s “Wrong” to make money by Longing Resistance or Shorting Support.

I’m a former Prop Trader and I’ve been trading crypto for 8 years.

I’m going to explain how I bet against reversal traders and win.

This style of trading is my niche.

Overview

• Market Conditions > Entry Rules
• Momentum and Mean Reversion
• Worst Mean Reversion Conditions
• My Momentum Trade Criteria

I will cover some concepts first and then get into the technical stuff at the very end.

It’s All About Market Conditions

If you take 1000+ trades on any strategy there are going to be good times, bad times and “meh” times.

The first thing to understand is that ALL strategies will go through windows of time where they:

• Do really well
• Do well
• Breakeven
• Do poorly
• Do really poorly

We want less trades on the left, more on the right.

To achieve this we need to be trading more in “good conditions” and less in “bad conditions”.

“Kite Flying” analogy

If the above is understood, it means that:

Optimizing how to define Market Conditions is actually more important than optimizing Entry/Stop/Target rules.

Momentum vs. Mean Reversion

Momentum (also known as “trend following”) and Mean Reversion (also known as “reversal”)

Most strategies fall under 2 main styles:

Momentum

• buy high, sell higher

Mean Reversion

• buy low, sell high

Worst Conditions for Mean Reversion (= Best for Momentum)

1. “grind” into the level

2. increasing volume over time

3. “staircase” type of price action

4. high volume/volatility on screener

If these are present, the coin is likely in a strong trend.

In order for us to Win we need our Counterparty to Lose.

We need to be trading when our counterparty is trading in their Hardest environment to maximize our chance of winning.

• Easy for them = Hard for us. ❌
• Hard for them = Easy for us. ✅

Live Example

coin: ENA/USDT

date: Friday, 25th July 2025

time: 02:00 - 11:00 (UTC)

price was slicing through every resistance:

• makes it harder to short the highs
• makes it easier to long the highs

An ideal environment for taking a Momentum Long.

Momentum Trade Criteria

slow grind into the level ✅

volume consistently increasing ✅

staircase price action ✅

Level Selection:

• major highs/lows

Entry:

• candle close through the level

Stoploss Placement:

• 1st or 2nd swing point (both are valid)

When NOT to Take the Momentum Trade

Knowing when to step on the brakes is just as important as knowing when to step on the gas.

The #1 most important thing to avoid:

• Vertical Fast Spikes into the entry level
• These are really good for Mean Reversion, which makes it really bad for Momentum.

Example below ↓

Jul 22, 2025

fast spike reversals: these often come back to where they came from example: ↓

Summary

Longing resistance and shorting support can work really well in the right environment.

Top 3 things I look for:

• a grind into the level
• consistently increasing volume
• “staircase” price action before the entry (ideally at least 2 hours of it non-stop)

Top 3 things I avoid:

• fast/vertical spikes into my entry level
• decreasing volume
• choppy/sideways type of price action

Enjoy the Alpha 🤝

your stoploss is my target

Source

Written by @spicyofc · View original post · Published: 2025-07-22