Momentum Indicator is a technical analysis tool for the MT4 platforms. This indicator determines the weakness and strength of the forex currency pairs and stock prices. With a momentum indicator, you can easily assess the trend conditions and the market sentiment.
The best part of this indicator is, it is useful for traders with any level of experience. Beginners may solely depend on momentum indicators for determining trend-following entries. Whereas, expert traders use it as a supportive trend indicator of their trading strategies. Because it helps you in filtering the trend-following trade setups.
This guide explains, what is the Momentum indicator, how does it work, and how to apply it in MT4 platforms for enhancing the trading results.
Momentum Indicator Overview
The Momentum indicator uses the simplest possible way for demonstrating the strength and weakness of the trading assets. The indicator line shows the trend and level of the momentum value.
Traders are only required to focus on the positivity and negativity of the indicator value for determining the possible upcoming price move. Besides, you can apply it to filter the signals of other trend indicators you use in your trading strategy.
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Momentum Indicator Explaination
The Momentum indicator applies a 14-period moving average system that monitors the rate of increase and decrease of the price within the selected period. The 100-level is considered as the neutral value of the indicator.
So, the indicator value rises above 100 means the uptrend of the price is backed by the bullish momentum of the price. On the other hand, the indicator value below 100 means the price is moving downwards following a bearish momentum.
If you already have a trading strategy, you can still add the momentum indicator as an MT4 technical analysis. In such a case, it’ll help you to distinguish highly potential trading opportunities from the regular trade setups.
Momentum Indicator: Buy Conditions
- Momentum indicator value rises above 100
- The price turns upwards from a significant support level
- SL below the current market low
- Minimum TP 1:1.5
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Momentum Indicator: Sell Conditions
- Momentum indicator value moves below 100
- The price rebounds downwards from a significant resistance level
- SL above the recent market high
- Minimum TP 1:1.5