Momentum is a technical indicator that helps to identify the bullish or bearish forces behind a price trend. This Super MT4 Momentum indicator can be used to predict the direction of future trends, even if you are not doing trend analysis.
Trend based indicators generally only show the current trend. These indicators are based on price changes. It does not reflect market sentiment. Sentiment analysis provides a snapshot of the buying/selling pressure underpinning an asset. This analysis helps us to predict future market movements and trends.
The main objective of the Momentum Indicator is to alert traders to changes in market sentiment. It works in all time frames and supports stock charts as well as forex.
How to use the Momentum Indicator in MT4 to identify buy-sell signals
This indicator uses a 14-period moving average system to check price momentum. If the indicator’s value is above 100, it may indicate a bullish trend in price. Conversely, if it falls below 100, it may signal a bearish move.
The chart above shows that the hourly candlestick chart for GBPUSD ended with a low below the 100 level. The indicator level fell below 100, confirming a bullish divergence. The indicator value then bounces above 100, signalling bullish momentum. If the indicator value reaches 100, we can trigger a buy or sell order.
If you are looking for a selling opportunity in the market, ensure that the indicator line stays below 100. If the indicator is showing bearish momentum, look out for price action signals that may signal a short entry. To confirm a sell order, you may be looking for a bearish convergence. A bearish divergence is when the price reaches a lower level while the indicator level reaches a new high.
Technical traders will find the Momentum indicator a great tool to help them understand the context of the market. Not only does it provide momentum signals, but it also helps to spot and pick out potential divergence situations. This tool allows beginners to test and analyse market momentum like an expert.