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The Momentum Oscillator indicator

The Momentum Oscillator is a type of technical analysis tool that measures the amount of change in the value of a certain asset over a period of time. Its main feature is that this tool is capable of identifying emerging trends in price movement and establishing optimal entry points on trend movement, moreover doing that ahead of the main chart and leveling out the possibility of signal delay.

When taking into account Momentum’s performance, we can set upcoming price change dynamics, instantly respond to trend changes, and enter the market at optimal points with a high level of probability. It is most effective in long-term trading; however, its use can be justified on short time frames as well.

On the MT4 terminal, the tool looks like this:

How it works

This auto-indicator operates based on comparing changes in the values of quotes: it shows us the differences in price values at the current time compared to their initial figures. To obtain the most accurate signals, the tool should be applied at the moment when its curve is moving with the chart according to the trend.

It’s possible for anyone to work with Momentum, even beginners, but if you already have some experience, you can use this auto-indicator for trading against the trend, operating with oversold and overbought zones.

You will need to do the following to set this auto-indicator on the price chart of the MT4 terminal:

  1. Find the menu item “Insert” at the top of the terminal;
  2. Open the sub-item “Indicators”;
  3. From them, choose “Oscillators”;
  4. Then set Momentum on the chart:

After it is installed, an active window will appear where you can reconfigure the settings of the tool as you wish:

Now the template field is ready:

Momentum indicator settings

In the setup window, you can change a few indicator parameters to perfectly suit your trading system.

  1. The default period value is “14,” but for long-term trading, you will need a longer period so that the frequency of the signals will be lower but their reliability will be higher. If you were to reduce the period you would receive signals more often, but their accuracy wouldn’t be very high.

  1. The range of movement is within “-100” – “+100”. The indicator moving will go within these values, indicating the direction of the price trend.
  2. Time frame – the time interval during which the indicator will be on.

  1. Among other things, you can adjust the extremes of resistance and support and change the color of the oscillatory moving, etc.
  2. “Apply to” is the price value the the auto-indicator is built on.
  3. “Fix min~max” is the available trading range.

Momentum on the options exchange

  1. It accurately predicts trend changes and generates reliable forecasts;
  2. It gives instant signals and is the easiest to use for beginners;
  3. It is an important component of professional trading strategies;
  4. It is most successfully used in combination with other oscillatory tools to generate the most reliable complex of signals.

An example of the auto-indicator installed on the MT4 terminal, where a downward trend is indicated:

To open a DOWN transaction on the Binomo terminal, prepare it in advance by opening the chart of the asset being traded and, when the auto-indicator signal is received, press the “Down” trading key.

Momentum can also be used in strategies that are used to identify overbought-oversold areas. The absence of fixed zones on the quotes is a characteristic feature, so for this reason any suitable means of analysis should be applied to the chart, for example, the Bollinger Bands or Stochastic.

This tool is also used successfully for trading with divergence, but a description of that method would require another article.

Minimum deposit

If you are a beginner, then it is not recommended to deposit too much money, as your excitement could prevent you from saving and increasing your capital. For example, you can limit yourself to ten dollars on Binomo (however, even when trading with minimum contracts, a beginner is more at risk of losing money, so it would be better to deposit at least 50 USD).

Money management

According to the principles of standard capital management, you should not open contracts that exceed 5% of the account balance for each of them.

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