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This indicator is an oscillator that identifies overbought and oversold areas while illustrating the strength of a trend. There are different ways of using the indicator and different periods to choose from. What is the Momentum Indicator and how is it Used?
Using Momentum Indicator to confirm trend
The default period is usually 12 or Here is the formula! Looks simple right? Well, it is that easy! If you look at a chart and add the indicator you will see how well the curves of the Momentum indicator follow the movement of the candlesticks.
The indicator can be used alone to identify the current trend in relation to previous market conditions. A horizontal line can be added at level When the Momentum line crosses above this line we consider the trend to be bullish.
If the line is below the line, the trend is considered to be bearish. Here is a picture of how it looks like, using period 14 with a line at As I mentioned above, there are various ways this indicator can be used.
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Instead of the horizontal level, you can add an SMA to the Momentum indicator and use crossovers as a sign for beginning of trends. For example; Momentum 14 and SMA 8.
However, not so surprisingly, the signals got how to make a lot of money tips more accurate and triggered much earlier on better locations when I changed the Momentum indicators period to 50 but kept the SMA 8.
Momentum indicator for trading binary options the following picture to the previous one, above.
Trend Momentum Binary Option system
Why does the Momentum Indicator Suck? If we only use the default values of momentum indicator for trading binary options Momentum indicator the curves will look very choppy. Choppier curves will result in fake signals. Furthermore, using the MI all by itself is not good for pinpointing accurate entries. The MI is a fast indicator, it displays whatever the candlesticks are doing and therefore it can trick you into thinking a trend is about to start.
How to Trade With the Momentum Indicator
Although this tool can show you where a possible trend is about to start, you will have no idea how big the trend is going to be if you solely rely on this tool alone. This tool is very useful in combination with other tools.
Using it with the SMA for example, will find you good spots to enter trades, riding with the trend. The indicator is easy to use and understand. Conclusion: Use it, or not Worth Your Moment? Also, I strongly suggest the use of support and resistance lines. The lagging SMA works very well with the MI and triggers the signals much sooner than the horizontal level does!
A lagging and a leading indicator work excellent together as they compliment each other. Changing the default period values of the Momentum indicator can vary the accuracy of the signals and the entries.
Tags: IndicatorsMomentum 6 min read The Momentum is a technical analysis tool, designed with the sole purpose of identifying the trend strength, which is the velocity of price changes. The Momentum is displayed as a single off-chart line and is easy to follow. The indicator can be used on any asset and any time frame — both novice traders and hardened veterans will find it useful. Read the full article to learn more about the indicator and ways to use it.
Obviously, this tool can be used on time frames other than the daily chart. However, the periods for the SMA and the MI must be adjusted accordingly to fit the time frame of your choice.
Remember though, lower periods mean more signals but also more fake-outs. In conclusion: the Momentum indicator can become the origin of a solid and working strategy for trading with the prevailing trend.