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Forex Indicator «Momentum»

The “Momentum” indicator is another member of the “Oscillator” family of technical indicators. The creator of the Momentum indicator is unknown, but Martin Pring has written much about the indicator. It attempts to measure the momentum behind price movements for the underlying currency pair over a period of time. Traders use the index to determine overbought and oversold conditions and the strength of prevailing trends.

The Momentum indicator is classified as an “oscillator” since the resulting curve fluctuates between values about a “100” centerline, which may or may not be drawn on the indicator chart. Overbought and oversold conditions are imminent when the curve reaches maximum or minimum values. The addition of a Smoothed Moving Average with the indicator improves interpretation of imminent trend changes.

Momentum Formula

The Momentum indicator is common on Metatrader4 trading software, and the calculation formula sequence involves these straightforward steps:

  1. Choose a predetermined period “X” (Standard value is “14”, although a value of “8” or “9” tends to be more sensitive);
  2. Calculate “Close1” as the closing price for the current bar;
  3. Calculate “CloseX” as the closing price “X” bars ago;
  4. MOMENTUM = 100 X (“Close1”/”CloseX”)
 

Trading spot currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. 

 

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