Momentum

Momentum trading indicator was created by Carl Swenlin.
Momentum trading indicator is an oscillator indicator that is used to measure the change of price of a financial instrument over a given time.
Momentum trading indicator is calculated using the following formula;

MOMENTUM=CURRENT CLOSE/CLOSEn periods ago

Unlike other oscillators,momentum indicator doesn't have a 0 oscillation.Instead,it ranges between 99.4 to 100.6.This is an indication that the values of the momentum may move above or below 100.
When the momentum moves above 100 then it means that the price is moving upwards while when the momentum moves below 100 then it means that the price is moving downwards.Therefore,this indicator can be used to signal the trader on when to enter a buy or a sell position.When the momentum moves below 100 from high then the trader should enter a sell position since the market will be moving downwards while when the momentum moves above 100 from low then the trader should enter a buy position since the market will be moving upwards.This is indicated from the candle stick chart below;



The candle stick chart above shows the momentum trading indicator.The two adjoining red arrows indicate the momentum indicator curve while point A shows a momentum point in which the momentum has moved below 100 from high thus signaling the trader to close any buy position and enter a sell position since the market will be moving downwards while point B shows a momentum point in which the momentum has moved above 100 from low thus signaling the trader to close any sell position and enter a buy position since the market will start moving upwards.

Recommendation:If you are a day trader just use 1 min,5 min,15 min and 30 min time frame while if you are a swing trader just use 1 hour and above time frame if you want the momentum trading indicator to work well for you.


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