Momentum (Momentum)

Momentum is one of the main indicators used in FXLORDS’ Managed Forex Accounts. The Momentum indicator measures the amount of change of the price during a certain period of time. There are two basic ways to use the momentum indicator.

• The Momentum oscillator can be used as a curve that follows the general trend, just like the (MACD). We buy when the indicator begins forming a bottom and change its direction back to top, and sell when it forms a top and change its direction down to the bottom. This indicator may require drawing a short Simple Moving Average on the indicator itself to confirm a top or a bottom.
• If the indicator’s value is too high or too low, relatively to their historical values, we must assume that the current trend is going to continue. For example, if the value of the indicator is very high and then it started to head lower towards the bottom, we must assume that prices will continue to rise probably to a higher top, and therefore, we are supposed to wait until the actual reversal of the price.
• In some cases, you can also use the Momentum indicator as a leading indicator. This method assumes that identifying a peak usually happens via a rapid increase in the price (when everyone expects higher prices) and that a bottom usually is formed after a fast decline in prices (when everyone wants to get out of the market). Although this is often the case, but this is also very general.
• When prices rise to form a top in the market, the Momentum indicator climbs sharply and then falls away or deviate from the actual movement of the price. Similarly, when the price falls, the momentum indicator will drop sharply and then begin to climb before the actual rise in the price (deviation). Deviations are cases where the indicator moves in the opposite direction on the price in the market.