Momentum Trading Indicators


hey my friend welcome to today’s lesson on momentum trading indicators using momentum trading strategies you’ll see that I’m using Forex here this is a a good tutorial for beginners also going to show you some setup some patterns and some strategies so well let’s jump right into it alright now as you can see here I am using the indicator called momentum and there it is right down there I’m gonna use my little yellow highlighter cool new tool I just got so I’m enjoying playing with that and now there are many different types of momentum indicators so right now for today’s purposes in today’s tutorial I’m only gonna be discussing the indicator X are called momentum the momentum indicator and as you can see I have it set to a default of 14 periods which equates to 14 bars whatever time interval that you might be using I’m using a daily and I’m using forex market here euro US dollar but again this is one of those indicators that really can be used on pretty much anything any time frame stocks Forex futures commodities a minis intraday trading it’s really very flexible okay now the first thing I have to tell you about the momentum indicator is that it is not a momentum indicator how do you like that so isn’t that ironic yep it is literally not a momentum indicator in fact most of the indicators that they tell you fit into the category of momentum indicators are not momentum indicators the reason for that is that momentum is velocity times mass that is the mathematical equation for momentum so with most momentum indicators in technical analysis they are measuring velocity or speed they’re basically well for example this one it’s identifying how fast prices moving up in down by how much that’s going to compare the generally the clothes of the price to the clothes a certain number of periods ago whatever you set the settings to in this day we’ve got her in this video we’ve got a set to 14 all right so it does measure speed acceleration but where does the mass part again velocity times mass is the equation for momentum so I equate mass in that sounds to volume in this particular indicator in fact most so called momentum indicators do not incorporate volume into them and so there is no weight if you will that is incorporated into the equation and therefore it is more properly termed as a rate of change or acceleration or a speed of market or velocity wherever you want to call it so let’s be just clear on that all right so now you might see that’s nitpicking but it’s really not because there are really other indicators that do incorporate both velocity and mass into them or in other words volume into them at the same time so you will get very different readings from those indicators you need to know that okay so how do we use this puppy okay so a couple of different things that we would look for so the first thing is we have a zero line here and there you go I actually should probably use a different color there since I set my momentum indicator to blue but that’s our zero line so anything that hovers around the zero line is basically just neutral meaning quite literally no momentum I’ll continue to use the word momentum just because well that’s what the indicator is called plan to avoid any confusion you know I think I’ll use the let’s use magenta maybe that’ll stand out better for us especially since the zero line is in magenta okay so there you go so you can see right in here now let me bring my cool new yellow highlighter up here so right there it’s just kind of hovering around zero and what is the market doing well the mark is pretty much just in a each Channel fact we could actually take it all the way back to here I suppose if we wanted to but and so yeah it’s just kind of moving sideways not trending up not trending down and you know there we go so that’s indicated by here as well now one of the things that some people have said as a criticism of momentum indicators is that they basically just follow price so you don’t really need to add them because they just follow price so in that sense of course you get the old objection that they’re lagging indicators and well that’s a whole nother discussion for another day maybe I’ll do a topic on that someday but there are times when it can be leading so for example let’s look at right here let’s just say let’s take that hi there that low there in these highs right so here we’ve got kind of a channel going on and we’ve got you know high low retest that high here we just kind of went sideways now but look we do have a difference here we do have a difference here so here okay we’ve been moving up and we’ve got a higher high in price about a bang there we go and now here we have an equal high on price but look at our momentum indicator lower high lower high so that can potentially be giving us a leading indication that wait a minute here we do have a different reading on price than we have on the indicator so the indicator is not just following price here price went up and made and equal high it actually technically if you want to look down to the very pixel on your chart real neurotic about it it made a little bit of a higher high but we’re not going to split hairs on that but this is a very clear lower high on momentum so what that would indicate is that momentum – well we had bullish momentum here okay and that really is just I wouldn’t say this is leading this but it is confirming yes so very important distinction when people say well there’s no such thing as a leading indicator you know again blanket statements like that are usually too simplistic this is one of those cases so there were many times and I would venture to say most times that it is true that momentum indicator for example will be following price and then I would say it’s confirming it’s confirming the move up already but there are some times and it’s not most of the time it’s a minority of the time there’s a minority of the time that it will give us a different signal than price so instead of getting and I’m getting a little messy here so let’s take all that offer there just to make this crystal clear so instead of getting a triple top here we actually go down and so definitely momentum the momentum indicator there is not following price right it’s telling you that this move up is on weakness there’s been a what we call momentum shift and that is very significant how do we apply that to real trading well let’s say that you had been long from down here and you allow the market to retrace a little bit maybe it likens a profits there but you’ve still got some money on the trade it comes back up here obviously you’re going to know well okay we’ve got resistance here and we’re gonna put in a double top or triple top or if you want to look at this or are we going to continue to keep going up and so you have to make a decision well do I want to let this puppy run expecting that there’s gonna be more profits here or do I think that’s going to be at well this momentum signal might tell you that you know what I think that’s gonna be it I think that’s as far as it’s gonna go so I think I’ll go ahead and just like some profits in there and I let the market run pretty good I made some pretty good money on this already and I’m not gonna expect it to move up anymore why because well the rate of change the acceleration whatever you want to call it momentum in this case it is diverging yeah obviously it’s a little divergence there from price action and then notice what happens we’ve already kind of shown this about that and just kind of go sideways and that’s just kind of go sideways to sono trance so we go from a trendy market to a non trending market and the first signal we get an early signal if you will is the divergence on momentum so that is one practical application of how it can be used I definitely recommend whether you use this you know traditional momentum indicator or one of the other 700 3d 2000 momentum indicators out there people get very creative with these indicators it’s actually pretty dang impressive how ingenious some people are with the mathematic mathematics of these indicators actually pretty darn impressive so but I just wanted to share with you the general concept here today looking for strength when we’re going in the direction of the trend and then we’re looking for a momentum shift at the end of a trend and then that’s when we would have a good indication remember indicators do what they indicate the answer is in the question but still they indicate okay now we owe you a probability scenario that hmm might not expect this to continue to go up any further great place to exit lock and some profits there and look for the next high probability trade so if you found value in this video and the other videos that I have on my channel go ahead and click the thumbs up icon below your comments are very cherished by the way post your comments below we’d really appreciate that if you have any questions or if you have any suggestions for future videos I actually keep a running list of to-do lists for future videos and where do I get that list I get it from you from your comments and get a little list here going I’m working my way through it and it all comes from your suggestion so feel free to do that and finally I am giving away one of my very favorite trade strategies called the rubberband trade you can get this absolutely free it’s a trade I take pretty much every day of the week very reliable super-high win-loss ratio one of my favorite trades and I’m gonna give it to you for free so it’s gonna give you the triggers the entries where to place your stop all that stuff all the details and along with that comes a little mini course of five short videos so my gift to you just go ahead and click on that green box in the top right corner of the video and it’ll take you to a page where you can sign up for that and I’ll be happy to send that your way you

33 Replies to “Momentum Trading Indicators”

  1. Thank you for your videos they help me understand the market a bit better. I have been trading for close to a year and i can still find useful inform on these videos.

  2. Thanks for video. Can we use as a reversal signal as well? I have checked this indicator on different currency pairs. Please Can you give other examples of trend break because double top is not always in the end of the trend. Properly we can use this indicator in bearish or bullish trend break.

  3. Is there a good oscillator that incorporates both volume and prices? maybe an oscillator that uses VWAP as a component somehow?

  4. So how do you know which divergences to ignore? Using some of the same logic, if you look at the Nov and Dec swing lows, and the dive in momo for Dec, Is it logical to think lower prices are ahead? Or are you using this indicator to only predict a slowing of price, not an acceleration or direction?

  5. Hi Barry amazing video alot of valuable points…. It would be great if u could share some more momentum trading strategies…

  6. I would love to see a video when you cover the differences between the different "momentum" indicators you seem to be using in various video, and why. Some of them look link a true MACD. Other times it looks like just a standard MACD histogram. Then other times you're using a SMI, but I can't seem to find an SMI that has settings like what you're showing. Maybe it doesn't even matter, but as for your "5 Energies" entries that seems to be the only thing that you change up from time to time and I'm very curios if there is a reason why. Thanks.

  7. Thank you very much for the insightful vid. I'm doing my PhD thesis on momentum strategies. As you rightly mentioned, there are hundreds of thousand momentum indicators. Do you know how can we access those indicators? I'm planning to compile at least 3000 of them, would appreciate if you could share any reference you may have. Thank you πŸ™‚

  8. Thank you Dr Barry for the lectures. Can you please teach me how to input the zero line on my momentum indicator? I use the MT4 platform and the indicator doesn't have a zero line. I do not know how to set the parameter.

  9. i cant understand if momentum is down and price is rising then its a bull market right how come price falls ? should i take a sell position when the momentum is down and price is high ? what are the length of momentum ?

  10. well, you have gained a subscriber here. It doesn't happen often to me not to have further questions on the videos I watch. Good to start from the definition of momentum (as an engineer starting out in trading I am really boggled at the definition they give to tools in trading. Is it that difficult to call it just Speed Indicator?).

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