Momentum indicators are a group of technical analysis tools that allows predicting the price change in the future providing appropriate signals. They work efficiently in a trending market as well as during the flat. Momentum tools determine the moments when the market changes are most likely. It allows to predict the trend change and make trades at the most favorable price. Read more about the principles of momentum indicators below.
Indicators are one of the most valuable trading tools, which allow you to analyze price fluctuations for the selected period. It's necessary to determine the market trend and its direction, and the trend indicators make it good. However, a trader needs to be prepared for price jumps, and sometimes, to predict the future.
The currency market is quite unpredictable, so it's not enough to just analyze the current situation. It is necessary to forecast to maintain and efficiently increase your capital. This traders' desire to foresee the price behavior caused the momentum indicators emergence.
What are the momentum indicators?
Unlike the trend ones, the momentum indicators give a buy signal before a new trend is formed or before a reversal occurs. Due to this tool, a trader knows where the market is most likely to find support or resistance in advance. Thus, it's possible to carry out a more thorough technical analysis, which means to predict the future events better.
Are the oscillators used in the forecasts?
Many traders have turned to oscillators searching for the momentum indicators. By the way, they are designed to work mostly in flat. Because of this, there is an opinion that momentum indicators mean the oscillators; however, it is not quite right. Such a technical analysis type is ineffective, since the oscillators mostly belong to the group of coincident or delayed indicators, and they allow neither to assess the real market situation nor to predict the trend movement in time.
Looking at the built-in MT4 oscillator set, you will easily find that each of them displays the movement speed of the value depending on the selected time. Thus, if you want, theoretically, to get an advance forecast, you'll choose an extended schedule period. However, due to the nature of the oscillators, you will most likely receive a belated signal that won't give you any advantage to enter the market. By choosing, on the contrary, a short analytical period, you'll receive a signal that will need a rapid reaction, which will reduce the solution effectiveness.
Within these factors, oscillators can't be called a real analog of a momentum indicator, at least during independent application.
Complex technical analysis is the best trading method
As we have already seen, all oscillators show the current situation without any useful information about the upcoming trend position. To get out of this situation with the maximum profit, you need to:
- Use advanced indicators that were already developed by specialists (you can download the free volume indicators on the MTDownloads website);
- Find a balance by the momentum and lagging indicators connection applying a single time frame.
Choosing the first method, you'll follow the path of least resistance, which practically guarantees the high-speed trading strategy optimization. In the second case, you'll have to test a lot of options, but you'll be able to analyze the market more widely, which will give an advantage in determining the future trend behavior and the market situation as a whole. The sophisticated trading method is more efficient than using each indicator separately.
Where to find the effective momentum indicators?
Forex trading is a complicated thing, and only an experienced specialist can judge how the price will behave tomorrow. In fact, therefore, traders use analytical tools, rewrite strategies, and test new trading options. They don't stop looking for new ways to expand trading opportunities. Therefore, new indicators have appeared in addition to the standard trading robots built in each trading terminal by default. Many of them can be downloaded on the MTD website. Experienced traders wrote such tools with the help of the programmers (or independently), who integrate them into the trading platform or allow other traders to take advantages of their labor.
It's easy to see that the standard Forex momentum indicators are very mediocre. You need help from the outside to get a more powerful technical analysis tool. And it's essential for each trader, because if you get the opportunity to determine the chance to enter the market in advance, then you will get a trump card that will allow you to control the financial activity in the Forex market opening only valuable deals and closing them in time.
On the MTDownloads site, you can learn the large list of Forex momentum indicators without any restrictions, understand the way they work, and explore the integration instructions after free download.