Momentum indicator is one of the oldest oscillator indicator in the world. Momentum indicator will show the difference between today’s closing price and the close N days ago. This is possibly the simplest and easiest to calculate indicator a trader could use to measure the speed of the price changing. Trader will only need to subtract the closing price from a certain time period to the current closing price. The balance point is 0 (zero). So, if the current price is higher than the price in the past, the Momentum indicator is positive. In contrast, if the current price is lower than the price in the past, the Momentum indicator is negative.
As a trend-following indicator, Momentum is similar with Moving Average Convergence Divergence (MACD). Commonly, the bullish signal happens when the Momentum indicator crosses the zero line and begins to climb. When the Momentum indicator falls down and crosses the zero line, it could be considered as a bearish signal. However, this indicator is only a helping-tool for traders in analyzing the market in order to make a proper decision. Still, traders are expected to react wisely before opening or closing their action until market value is proofing the correct indicator signal. By doing so, they can avoid bad result caused by such wrong actions they probably made.
Broadly speaking, the use of this indicator can also harm traders in doing their trading. It’s because by the moment the Momentum indicator goes back to the zero line, mainly or even all of the profit have probably eroded. In the worse case, the trader has turn into a losing position. To avoid this, traders can make a trend-line and use this line to predict whether it is an exit signal or not. If the trend-line is broken, it could be interpreted as an exit point.
So, if you are a PAMM trader or PAMM manager whose goal is to make maximum profit by doing the correct action of buying and selling, you must be very careful and alert in reacting to the market condition. You can use variety of technical indicators to help you making an accurate decision so that your profit will be consistant. If you are a PAMM investor, you are also in alert position and it’s better for you to make sure that your PAMM trader is doing the correct trading actions with your money.
Happy trading using PAMM Investments system !
Don’t forget to read this important article for PAMM trader
1. How to become a PAMM Trader
2. Understanding your Forex Trader Level as PAMM Trader