Uses of Momentum Indicator in Intraday Trading
Intraday trading, intraday trading tips for tomorrow, intraday cash tips, trading tips, free intraday tips, money classic research. In this post, you will get to learn, why traders feel the need of using momentum indicator while analyzing the market technically. One of the most frequently used technical indicators in Forex trading is PPO. As we know that the price percent oscillator is a momentum indicator, so it uses the similar calculation as that of moving average convergence divergence indicator.
In other words, you can say that it is a variation on the popular moving average indicator. The PPO makes a histogram representation similarly like that MACD does. However, PPO Calculation includes subtraction of a long-term exponential moving average from a short-term exponential moving average. Then the result is divided by the longer-term EMA.
Intraday trading, You can also say that in a PPO, you need to calculate the difference as a percentage of the longer-term EMA. The PPO indicator is used to indicate overall market trends. It also helps technical analysts in measuring the strength of a trend. Some people use this indicator to find the signal of change in trend.
The momentum indicator also provides the trading signals that are the directional signal given when the histogram leaps over the zero line. This shows the distinction between positive and negative values for the PPO. However, many technical analysts begin a trading position as soon as the histogram changes direction in its slope, but few traders wait for a histogram to cross over the zero line.
Intraday trading, When the histogram crosses the zero line, it is more definitive signal of the trend change. With the help of this signal, a forex trading strategy can be developed, which offers limited risk against outstanding profit potential.
The technical analysts of Money Classic Research are well-versed in implementing momentum indicator to generate accurate and free intraday tips.
Do Not Get Confused between Momentum and Trend Indicator
This is my last post I have explained that what is momentum indicator, how it helps analysts and its example. But, now I felt the need of mentioning the difference between momentum indicator and trend indicator. There are many people out there, who think all the indicator works in a similar manner. But that is not the truth. Different type of technical indicators has the different role while analyzing the market.
Read the following type of technical indicators in order to know the difference between them.
The momentum indicator is used to compare the prices over time. Thus it is useful for traders to recognize the pace of price movements. This technical indicator is also implemented many a time to evaluate the volume of assets. However, it is mainly applied to the price of the stocks. The momentum indicator is estimated by matching up the prior closing prices of the stocks to the current closing prices. You will notice that a line (indicator) occurs below a price chart swinging as momentum changes. Future price is signified as a divergence between price and a momentum indicator. Some of the examples of momentum indicator are Momentum, Relative Strength Index (RSI) and Stochastic. The strong buying possibilities are predicted by prices making lower lows.
Like the name, trend indicator is used to predict the trend of the market. In the stock market, it is difficult to distinguish that the market trend is bullish or bearish from oscillations and noise of the market. The nature of the market is the up and down swings. To forecast this nature, whether the market is bullish or bearish, the trend indicators are implemented. To measure direction and strength of a trend, this indicator is used. Trend indicator makes use of price average and establishes a baseline. The market is bullish uptrend when the price progresses above the average and vice versa. The market is bearish downtrend when prices drop below the average.
Hope, now you have the clear picture of trend indicator and momentum indicator in mind.