Momentum Indices Technical Analysis and Momentum Oscillator Indices Trading Signals

The momentum indicator uses equations to calculate the line of plotting. Momentum measures the velocity with which stock indices price changes. This is calculated as the difference between the current stock indices price candlestick and the average stock indices price of a selected number of stock indices price bars ago.

Momentum represents the rate of change of the stock indices price over those specified time periods. The faster that indices prices rises, the bigger the increase in momentum. The faster that indices prices decline, the bigger the decrease in momentum.

As the stock indices price movement starts to slowdown the momentum will also slowdown and return to a median level.

Momentum

Indices Technical Analysis and Generating Indices Trading Signals

This stock indices indicator is used to generate technical buy and sell stock indices trading signals. The three most common methods of generating trading signals used in indices trading are:

Zero-Centerline Crossovers Signals:

• A buy stock indices signal is generated when Momentum crosses above zero
• A sell stock indices signal is generated when Momentum crosses below zero

Overbought/Oversold Levels:

Momentum is used as an overbought/oversold indicator, to identify potential overbought and oversold levels based on previous readings; the previous high or low of the momentum is used to determine the overbought and oversold levels.

• Readings above the overbought level mean indices is overbought and a indices price correction is pending
• While readings below the oversold level the stock indices price is oversold and a indices price rally is pending.

Indices Trend Line Breakouts:

Indices Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum begins to turn before stock indices price thereby making it a leading indicator.

• Bullish reversal - Momentum readings breaking above a downward indices trend line warns of a possible bullish reversal stock indices signal while
• Bearish reversal - momentum readings breaking below an upward indices trend line warns of a possible bearish reversal indices signal.

Technical Analysis