The technical indicator of the foreign exchange market Momentum measures extent of change of cost of a financial instrument for separately taken time period. This indicator Forex enjoys wide popularity among traders because of his simplicity and universality. But also it is necessary to consider the fact that it is considered quite rare “the advancing indicator”. Besides simple response to the direction of the movement of the prices, the Momentum indicator can change the direction still before it is made by the prices.
It is quite difficult for Momentum to carry to those indicators which follow a trend or to countertrend indicators. It is applied to demonstration of the direction of a trend and can also give quite good cautions of buying up/resale that does it by the useful countertrend trade tool. This indicator actually contains much more information, than it seems at first sight.
The indicator Forex of Momentum gives to the trader an exact measure of speed of the foreign exchange market and that limit to which the trend still is full. His calculation quite simple: the price of closing of n of days is subtracted from today’s price of closing back. The result will be presented in the form of the positive or negative number fluctuating about a zero point or the line. Is as follows: formula
M = Pt – Rt-n
where M – momentum, Pt – today’s price of closing, and Rt-n – the closing price for n of the periods (usually n of days) to Pt. The value n is the only part of a formula which can be altered by the trader, and most often the value 10 is applied here. Some software packages allow the user to choose for the periods of the price of opening, peak, the hollow, closing and some other values of the price.
10-periodny indicator Momentum Forex
The technical research which, as a rule, fluctuates about the zero line is a consequence of such calculation. If the foreign exchange market moves in the direction up, the Momentum indicator will cross the zero line from below up and will keep a bias upward. If the market moves down, then Momentum will cross zero level from top to down and will keep a bias down. All this looks very simply, but the Momentum indicator has also other more difficult properties. For example, the further stand in the price of Pt and Rt-n, the it is more than a distance between values of the moment. When the market quickly moves in the ascending direction, also the Momentum indicator behaves. But when the market approaches the peak and the prices of closing become closer to each other, the Momentum indicator is considerably slowed down, and the line of the moment becomes horizontal or bends down in spite of the fact that the prices can continue to grow.