The Momentum Indicator is a forex trading indicator. The Momentum Indicator can be used with any forex trading indicator. This can also be used with any currency pair that are used in the forex market for the market trading.
The momentum indicator is based on the logic that the closing price and the price values before the all closing prices are calculated with the difference of these closing values.
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Working of the momentum Indicator
The Momentum Indicatoris basically a technical indicator that tells the past and the current closing prices with the difference of the n closing prices. The total strength of the price movement can be known through the Momentum Indicator.
Stochastic momentum indicator
This can be known by the line if chart on the indicator. This indicator can be used for any time frame. This totally depends on the desire of the trader that for which time frame he want to use this indicator. This Momentum Indicator works well for all type of time frames for the trading purpose. The Momentum Indicator is represented with a single line and a bar line on the graph or chart of the indicator.
Calculation method to find the Momentum Indicator
As we already discussed that the momentum can be known with the difference of the closing prices. The momentum of the price can be easily known.
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There no tough process to know the momentum of the price values. There are different formulas for the calculation of the momentum. Here I will share one formula through which the momentum can be known. The traders can also use other formula for the calculation.
M = (CP / CPn) * 100
The momentum (M) is a comparison between the current closing price (CP) and a closing price “n” periods ago (CPn).1 You determine the value of “n.”
The momentum indicator can also be used to find the trading signals. The Momentum Indicator can also be used to tell about the market trading signals. But the Momentum Indicator works very well for the price estimation values. This can tell the validity of the price action based on the past or present.
High momentum and Low momentum
The momentum of the price will be high when the line bar of the chart moves up to 100 on the chart and the momentum of the price will be low when the line bar of the chart moves down from 100 on the chart.Through this the increment and the decrement of the momentum for the trading can be known.
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Buy and Sell signals
The buy and sell signals also produced by the momentum indicator. The momentum indicator can also be telling about the market overbought and the oversold condition.
Here when the Buy when the momentum indicator from under moves above the price movement and sell when the momentum indicator from above moves below the trend line. If the buy signal will be generated then this will tell and show the bullish trend of the market otherwise the trend will be bearish.