Indicator Momentum

# Thread: Indicator Momentum

1. ## Indicator Momentum

Momentum is used as an indicator to know the trend of the market. If it is going up, it can be read as bullish sign and vice-versa. It is also usually called as ROC (Rate of Change).
Momentum is calculated within specific time period (n). The formula is current closing price divided by last (n) closing price times by 100. Usually, the default n is 14. In meta trader 4, the reference value for indicator was 100. So if the momentum indicator going up from 100, the trend is going bullish. While, if it is going down from 100, the trend is going bearish.
Momentum indicator has 2 functions. The first one was to know the trend of the market and the second one was to indicate whether the trend will keep going or not.

I will show the first function first. As you can see from the picture, there are 2 boxes which I highlighted. Red box indicated bearish sign since it is going down from 100, while the yellow one showed bullish sign since it is going from 100.

For the second function, we need the help of moving average indicator which is pointed by the blue arrow. This Moving average is needed to differentiate false signal or not. It is usually used with period of 20. So, it is calculate the average value of the closing prices within 20 days since I use closing prices for easier explanations.
As we can see, I use yellow and red box to explain how it works. When you see the yellow box, the momentum indicator value was at its lowest. In this case, we won’t trade in this particular situation since the moving average also still showed bearish sign so it’s not a good time to buy low and sell high. So, never try to trade when indicator momentum reach its highest or lowest position
For the red box, it explained the best position to buy low and sell high. The indicator momentum is not at its lowest value and the moving average showed a sign of bullish. This will be a perfect opportunity to buy and sell high later. As long as the Moving average indicator going bullish and momentum indicator is above 100, it’s safe to wait for higher price to take profit.
I recommended using this momentum indicator since it is easy to use with the help of moving average. It’s a good choice for beginner trader who want to learn how to become a technical trader. It still need experiences and time to get a good position whether it is buy or sell even though the momentum and moving average indicator were in a synchronized trend since market is volatile.

2. [lang=id]Do you really think it's safe to buy below or above 100? I don't think that we can really make some entry only with that. And what about if the voletility starts? can we depend on it?[/lang]

3. I think that it's safe to buy when the momentum is below 100 and when the trend of moving average is going bullish. To be honest, I don't like to trade when volatility started since there is a possbility of false momentum or knee jerk situation. So to answer your question, my personal opinion is that we can't rely on momentum when volatile starts.

4. Originally Posted by sekiryutei
I think that it's safe to buy when the momentum is below 100 and when the trend of moving average is going bullish. To be honest, I don't like to trade when volatility started since there is a possbility of false momentum or knee jerk situation. So to answer your question, my personal opinion is that we can't rely on momentum when volatile starts.
[lang=id]ok that's actually the same as what i was thinking in here. Thanks bro.[/lang]

5. Originally Posted by Vicko
[lang=id]ok that's actually the same as what i was thinking in here. Thanks bro.[/lang]
No problem. In case there are many things you want to try out in here and you still feel confused about this indicator then you can ask me again. Good luck!

6. Personally I am not using this indicator but really a good indicator for all trend follower trader's. I am using couple of other indicator's to know about the market trend, I can see that its very simple to calculate the momentum of the market with the help of this indicator. So its specially effective to collect the trend momentum or there is any other function of this indicator too?

7. Yeah, I think the same. It's best to use it to know the tend trend of the market. To calculate the position of stop loss and take profit, another indicator should be used. Nevertheless, it's a good indicator to know the trend of market and it's easy to use which is a plus point for momentum.

8. Originally Posted by sekiryutei
Yeah, I think the same. It's best to use it to know the tend trend of the market. To calculate the position of stop loss and take profit, another indicator should be used. Nevertheless, it's a good indicator to know the trend of market and it's easy to use which is a plus point for momentum.
Yes sir this indicator specially made for the momentum collection of the market so we can collect the trend information of the market with the help of this indicator. Trading analysis formula is looking very simple in this style above the point 100 market is bullish and below the point 100 market is bearish. Overall performance of this indicator is looking good.

9. Momentum based indicators are pretty much rare thing in the market or forex market but in stock market they are used quite often. yes momentum based indicators are good if you can use them the right way. It cannot tell you the markets direction directly but will help you to figure things out.

10. Is the indicator already on mt4 platform or you will need to add it to list of custom indicators and if the latter is the case, the indicator is not attached here for people to download and test . If you do not attach it , you could as well given a a downloadable link so that people will visit and download and come back here later to tell people how good or otherwise the outcome is

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