Forex. Indicator of the moment.
The most popular oscillator is a technical analysis indicator Forex Momentum, which indicates the rate of change of prices, ie, the rate of price change. This is one of the most effective and simple technical analysis tools.
Here is the indicator formula.
Momentum Simple = C - Cn
C-is the closing price of the current period.
C-n - is the closing price N periods ago.
NB: not all textbooks treat the same formula Momentum. The formula used is taken from Murphy textbook on technical analysis and, most likely, that this formula is correct.
Offers another variation in the calculation of the indicator Momentum Akelis textbook. Here is an Technical Analysis from A to Z, which is an indicator Momentum Rate of Change, and a formula is:
Momentum = 100hS/S-n
This formula has been used by many programs on technical analysis.
There is another separate formula called Chande Momentum Oscillator, which is calculated by:
Momentum Simple = C - C-1
Momentum indicator - this is the simplest trend indicator. Used for a formula is very simple and straightforward and does not require description. Since ascending trend - this is when the current closing price above the last price, but if the opposite, and the current price closes below the previous price for a certain period of time, it is a downward trend.
Sometimes the smoothed momentum to reduce its volatility. To do this, use the moving averages.
In many cases, the indicator ahead of the price movement. Before reaching the top of the movement indicator is set (prices rise) and then begins to fall, and then turns down move. In the reverse situation is reversed: the LED market slows min before falling (with prices continuing to fall, but more slowly), then turns around and moves up.
Using the Momentum:
Momentum indicator is used as an oscillator. Sell signal may appear only when the Momentum or moving average will rise to the perceived value, turns and drops. The signal to buy may appear only when the Momentum or moving average upadana a significant amount of turns and moves up. This "significant value" is different for each currency pair in Forex and must be separately tested.
Indicators can be used in Forex as trendovoy indicator is used to signal the intersection of its zero line. A signal to sell predstavyaetsya crossing the line from top to bottom, and a buy signal is crossing the line opposite.
With momentum indicators are also used analysis of divergence.
If prices are at new highs, which is currently higher than the previous, and Momentum at this time is at a new high, but lower than the previous one, which means that soon may begin an upward movement down.
And the situation is the opposite, if the prices are on the new minimum, which is currently lower than the previous, and Momentum is at a new low, but higher than the previous one - which means that soon may start turning downward movement upwards.
Disadvantages:
Disadvantages of this indicator are the same as in the other. In practice, repeatedly proved instability and unpredictability of the forex market. Therefore, when predicting future price movements, which are different from the weighty core, should take account of these other indicators. This way you will save yourself from false entry and exit signals from the market.
Risks: do not use indicators on real accounts test when choosing a trading strategy or without initial testing on a demo account. Any indicator if used correctly, give false signals and subsequently can