Exchange Rate Indicator (Momentum) [Oscillator]

Tempo Indicator (Momentum) - technical exchange indicator, which displays the magnitude of price changes over a certain period of time.

It is a standard indicator of trading MetaTrader terminal.

The main ways to use the Momentum indicator include:

1. using the analogy of MACD oscillator: a signal to buy appears when Momentum forms a trough and starts to rise; a signal to sell is when it reaches a maximum and then turns down. In combination with moving averages with a small period it gives a more accurate signal about the moment of the price chart reversal.

2. Trend Momentum is determined by the appearance of extremely high or low values. When the indicator reaches very high values and turns down, you can expect prices to rise. At the same time, to minimize risks, it is better to wait for the price to confirm the signal of the indicator.

3. use Momentum indicator as a leading one. This method is based on the theory that the final phase of an upward trend is often accompanied by a rapid rise in prices, and the end of a bear market by their fall.

When the market approaches the maximum trend point the readings Momentum indicator rise sharply, and then begin to fall, while the price chart continues its upward or flat movement. Conversely, at the base of the market Momentum drops sharply and then reverses upwards even before the price chart begins to rise. Thus divergences appear between the indicator and prices, which signal the imminent end of the trend.

Formula for calculating the Momentum indicator

Momentum is the ratio of today's price to the price of n periods ago:

MOMENTUM = CLOSE(i)/CLOSE(i-N)*100,

Where:

- CLOSE(i) - the closing price of the current bar;
- CLOSE(i-N) - the closing price of n bars ago.