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The Momentum indicator is an indicator of the simplest, but it also generates valuable insights on the market. In this article you learn to analyze and trade FOREX pairs using the Momentum indicator.

The momentum is calculated by a simple formula: It represents a value equal to the difference between each consecutive two candles (or bars). This calculation alone would Whipsaw many signals with an accuracy very low. Therefore, the indicator values are smoothed using a moving average, typically 14-rolling average periods easy.

The Momentum indicator can be traded in the following methods:

Method 1: Online Zero Cross
The basis of this method is to enter trades when the indicator Crosses the zero line. It is recommended not to use values indicators, but use a smoothed version of it (a 14-EMA on Momentum). It is a very good trend in the manner that produces good results GBP \ JPY and GBP \ USD Forex pairs. A cross the zero line (or line 100 in some platforms negotiation) indicates a trend change in couples.

Method 2: Trend-Line Break
The basic method of negotiating other hand, is to analyze trends graphic on the dial indicator – especially the trend line graphic pattern. It is analyzed the same way that price is analyzed — looking for a trend line to the indicator which is broken, and enter a profession in the sense of escape. It is a method more sophisticated business that is not so popular, but always produces good signals. He was first featured in the book of Martin Pring, On Market Momentum. This book is dedicated to learning and analysis of the momentum indicator – and it is highly recommended.

Method # 3: Separation Range and Trend
Another analysis capability that grants us the Momentum indicator is the ability to identify trends and ranges. This is done via the value of Momentum Indicator – records indicate a strong trend, while an average of readings (about the zero line) indicates that the price is within reach. This method is effective at filtering out periods of tracks trends in the following trading systems.

Looking for the BEST indicator? – Check out the FXUltraTrend! This indicator made 127,912$ since the beginning of 2009, simple and easy to use. This is the indicator you can’t afford to miss!

USD/CAD & GBP/JPY Forex Weekly Analysis – Week of 22-Jun-08

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