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Thread: How To Use Momentum Indicator

  1. #1
    Join Date
    Aug 2014

    Default How To Use Momentum Indicator

    Momentum Indicator Definition
    Momentum Oscillator is an indicator that shows trend direction and measures how quickly the price is changing by comparing current and past prices.
    How To Use Momentum Indicator-momentum-indicator-png

    How to Use Momentum Indicator In Trading
    The indicator is represented by a line, which oscillates around 100. Being an oscillator, momentum should be used within price trend analysis.

    Crossing the x-axis:

    It is believed that if the indicator climbs above 100 during an uptrend, it is a bullish signal;
    Otherwise if the indicator falls below 100 during a downtrend, a bearish signal appears.

    Falling out of its normal range:

    Extreme points mean that the price has posted its strongest gain or loss for a particular number of moving periods, supporting trend strength;
    At the same time if the price movement was too rapid, they may indicate possible overbought and oversold areas.

    Divergence patterns:

    If the price hits a new high, but the indicator does not, that could mean that investor sentiment is actually lower;
    And on the contrary if the price falls to a new low, but the indicator does not support the drop, it is a signal that the trend may end soon.

    Momentum Indicator Formula (Calculation)
    Momentum = (Current close price / Lagged close price) x 100

    How to Install Momentum Indicator in MT4 Charts
    Momuntum indicator is standard Metatrader indicators, to put this indicator in your chart, please click Insert >> Indicators >> Oscillator >> Momentum . The default setting momentum indicator is a period of 14 and apply to Close.

  2. #2
    Join Date
    Jan 2015


    The Momentum Technical Indicator measures the amount that a security’s price has changed over a given time span.

    There are basically two ways to use the Momentum indicator:

    You can use the Momentum indicator as a trend-following oscillator similar to the Moving Average Convergence/Divergence (MACD). Buy when the indicator bottoms and turns up and sell when the indicator peaks and turns down. You may want to plot a short-term moving average of the indicator to determine when it is bottoming or peaking.

    If the Momentum indicator reaches extremely high or low values (relative to its historical values), you should assume a continuation of the current trend. For example, if the Momentum indicator reaches extremely high values and then turns down, you should assume prices will probably go still higher. In either case, only trade after prices confirm the signal generated by the indicator (e.g., if prices peak and turn down, wait for prices to begin to fall before selling).

    You can also use the Momentum indicator as a leading indicator. This method assumes that market tops are typically identified by a rapid price increase (when everyone expects prices to go higher) and that market bottoms typically end with rapid price declines (when everyone wants to get out). This is often the case, but it is also a broad generalization.

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100, analysis, average, divergence, high, historical, how to, indicator, indicators, macd, metatrader, moving average, mt4, oscillator, security, signal, time, trading, trend

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