Hi, this is María, today we are going to explain a little bit about the Momentum Indicators
These indicators are usually called momentum oscillators because the indicator line ¨oscillates¨ up and down between or around specific values-much like a wave.Some of this indicators are:
2. Average True Range
3. Bears Power
4. Bulls Power
5. De Markers
6. Moving Average
and more. (This indicators are some use in the eForex platform).
They are all based on the relationship of the current price to previous prices for a specified period of time. Therefore, oscillators, are lagging indicators (backward looking), and have no predictive use. Price confirmation must occur before entering a trade.
Momentum indicators work best in ranging markets. They tend to give false signals during breakouts and trends, specially when using hourly or shorter timeframe charts. Oscillators are used to help determine if a price movement:
*will be sustained (and possible become a trend).
*has finished and is likely to reverse (for how long is unknown, may be a retracement).Momentum values can be interpreted as follows:
*values are positive and rising -means price are rising, indicating buyers are active.
*values are slowing-prices rises are slowing, buyers are leaving the market.
*values are falling-prices are falling and sellers are active.
The steepness of the oscillator line or lines (or rate of change) is always significant.
Oscillators have ranges of values and in many cases, the extreme high and low values are termed as overbought and oversold, respectively. There is usually and upper and lower line on the charts; these lines indicate the overbought and oversold zones for indicator.
Buy or sells signals are usually indicated if the oscillator moves out of a zone. However, remember that momentum is only an indicator, wait for confirmation of trend changes by actual price movements.The 3 main momentum indicators used by traders are:
1. The RSI
2. The stochastic
3. The MACD, which is not really a momentum indicator but a number of moving averages, but it works like a momentum indiator.
The RSI is a single line indicator and the strongest signals are given when the line leaves the zone (also, divergence with the price is a stronger signal).
Hope it will help you trade better.
Until next time, all the best
Maríawww.fx-megaforex.com/ebook.htmSmart solutions to your profesional trading.