Momentum Indicators Guide – Everyone is well known to the fact that momentum holds a great significance in physics. The term has its own importance in the market, too. We can understand this concept with a very good example pertaining to the mechanics of a moving pendulum. There is no vertical motion of the pendulum when the bob of the instrument goes from bottom to the top. Though there are number of forces are acting behind the whole process yet the greatest value of the aggregate force is applied at the topmost range of the pendulum. There is no displacement at the top in respect of the vertical axis although it has the maximum acting force at that point. On the other hand, the force is at the minimum when the speed of the pendulum is at the maximum. In this way, the back and forth motion of the pendulum is generated. The above mechanism is seen in the trading market also that gives rise to the oscillation of the market prices.
In the same way as that of the pendulum, the speed of the price action acquires the maximum speed when the price fluctuates between the two extremes at the entry of a new trader. This will continue until any unexpected event in the market disrupts it giving it an anonymous high in price index of the market. This may be the other way round in the case when the number of new traders decreases. But, when the market trend surges, the opponents acquire dominance suppressing the price action.
The above price swinging in the market is greatly depicted by these momentum indicators. There is no denying the fact that these indicators cannot give comprehensive and satisfactory results like those physicists in case of pendulum but a detailed study can lead to stabilizing the market and knowing the present market trend in a more appropriate manner. But, it may help in knowing the underlying strengths of the trend of price action.
Futured Momentum Indicators
All ADX, RSI and CCI MT4 Indicators
Trix With Alerts MT4 Indicator
3D Oscilator Alert MT4 Indicator
Stochastic Divergence MT4 Indicator
Colored Stochastic MT4 Indicator
Multi Stochastic Oscillator Stack MT4 Indicator
Woodies CCI MT4 Indicator
DiNapoli Price Oscillator MT4 Indicator
Know-how for using Momentum Indicators
No doubt, there is not a single and favorable rule to use the indicators like momentum. There are many traders who know the exact market pattern and make profits without using the momentum indicators. But, if you are a new trader and just have made an entry to a marketplace you must know the less volatile and more stabilized marketing trend in order to make huge profits.
Momentum indicators do not come in the category of the directional indicators rather they can speak in volume of the different marketing patterns to an experienced trader. In fact, a trader may know the exact time when the money is to invest and when the market is not so volatile. With these indicators you are ought to get certain basic pints about the current economical fiscal and may introduce yourself to a new strategy. Using the momentum indicators will illustrate you in detail about the dynamic behavior of the market volatility and the enthusiasm of the traders. Apart from exploiting the crossovers, RSI are often used to determine the market reversals in the future with not many efforts that will show you the correct lows and highs of the marketing pattern.
There is a different method of using momentum indicators with the help of convergence and divergence tricks. Being a trader you must not seek the price action favored by a momentum signal but you must see the time when the momentum is contradicting the price action. Just like the pendulum, you should search for the correct market pattern where momentum falls speedily but the price action accelerates giving rise to reversal in the market. After reaching this point, the traders are ought to get benefits from the existing ensuing correction in the market with entering into a counter-trend position.
Types of momentum indicators
We may get popular and numerous types of momentum indicators, also called oscillators. In general, the principles which are applied to the oscillators are also applied to the momentum indicators that are discussed in this article below.
Oscillators: RSI, MACD, CCI or Stochastics indicators are also included in the category of momentum indicators which are liable to oscillate between two extremes or levels that are predetermined. These oscillators can be manipulated by the various techniques of crossovers and divergence/convergence phenomenon.
According to its names, it is scheduled to explain the impulse of the marketing trend and it is considered one of the simplest indicators.
Rate of change
This is the most advanced form of momentum indicators and it finds its use in the market place where the swinging ability of the trend is too strong. This is a very simple and easy-to-interpret technique and gives you a refined illustration of the marketing trend.
The Williams indicator may be also called a momentum indicator.
As per the current reputed books on technical analysis, momentum indicators are restricted to range trading. But, one may use it in illustrations where the indicator solidifies as compared to the other indicators giving a more suitable marketing trend.
Each of the above momentum indicators will be discussed in detail.
We can use momentum indicators with the other types of indicators establishing directionality. It is easy to generate more precise exploiting trading points when these indicators are combined with Fibonacci indicators. While wishing to know the current trend on a single trade, it is recommended that one should not use more than one resemble indicators. So, the markets which are strongly directional and bubbles development is dominant, you should not prefer the momentum readings even though divergence/convergence patterns seem to be stronger.