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Define "Strong Momentum" So a Computer Could Find It

Traders say "enter on strong momentum" as if the phrase were precise. Here are three ways to pin it down, and a method to choose between them.

Definition one, candle size: the signal candle's body is at least 1.5 times the average body of the previous ten candles. If the last ten bodies averaged 8 pips, a signal needs a body of 12 pips or more.

Definition two, close location: the candle closes in the top 20 percent of its range for a long. A 40-pip candle must close within 8 pips of its high.

Definition three, rate of change: price has risen at least 1 ATR over the last five candles. With an hourly ATR of 12 pips, that means a 12-pip gain across five hours.

Each captures a different idea: size, conviction, and speed. They overlap but are not identical. A large candle can close mid-range, and a steady drift can satisfy the third while producing small candles.

To choose, test each on the same history. Mark every signal for one definition across, say, 150 candles of data, record what happened over the next ten candles in R terms, and repeat for the others. Keep the same entry and exit rules so that only the definition changes.

Compare the number of signals and the average result. A definition producing 8 signals is too thin to judge.

Try this: write your own definition of one fuzzy term, and list the first five chart candles that qualify.

Pinning down vague terms is very useful. I would test each definition over the same data and compare results. Often a combination works best, for example a large body that also closes near its high.

I went through almost exactly this exercise with the candle size version and found the lookback mattered more than the multiplier. With a ten-candle average on M5, the first big candle after a quiet Asian session always qualified, even if it was only normal by London standards. Switching to a twenty-candle average from the same hour on previous days cut the number of signals by about a third and removed most of the false ones at the open.

Close location turned out to be the most useful of the three for me, but only as a filter. On its own it fired on tiny candles that happened to close at the top of a two pip range. Combined with a minimum range of about half the ATR, it became a decent definition of a candle that actually meant something.

My own fuzzy term was "clean pullback". I ended up defining it as a retracement of 38% to 62% of the previous swing, completed in no more than six candles, with no candle closing beyond the swing start. Writing it down that precisely showed me how many of my so-called clean pullbacks weren't.

The three definitions capture genuinely different ideas, and the examples show how they can disagree. A candle with a body 1.5 times the recent average might still close in the middle of its range if it had a long wick. A steady drift of 12 pips over five hours meets the rate of change test without any single large candle. So a trader who says they enter on strong momentum might be thinking of any of these, and their results would depend on which one they actually use in the moment. Writing down the definition removes that ambiguity and makes the strategy consistent.

Combining definitions is another option worth testing. Requiring both a large body and a close in the top 20 percent of the range captures candles that are big and decisive, which might filter out large candles with long upper wicks that show rejection. A big candle that closes well off its high often marks exhaustion rather than strength. The combination will produce fewer signals than either alone, so the sample size issue the post mentions becomes more pressing. Testing each definition separately first, then the combination, shows whether the extra filter improves the average result enough to justify the reduced number of trades.

Keeping the entry and exit rules fixed while changing only the definition is the right experimental design. If the exit rules also changed, it would be impossible to tell which change caused the difference in results. Recording the outcome over the next ten candles in R terms gives a standard measure. Some traders also record the maximum favourable and adverse excursion over that window, which shows not just whether the signal worked but how cleanly. A definition whose signals move quickly in the right direction with little adverse movement is more useful than one that eventually works after a deep drawdown.

The point that a definition producing only 8 signals is too thin to judge is important. With 150 candles, some definitions will fire rarely, and their average result will be dominated by chance. Testing on several thousand candles, across different pairs and market conditions, gives a more reliable comparison. Has anyone here tested different definitions of momentum or another fuzzy trading term? I'd be interested in which definition worked best for you, and whether the results were consistent across pairs or varied depending on the market being traded. Even a rough comparison would be a useful start for others.