Momentum Indicators in Forex Technical Analysis

October 31, 2015

momentum indicatorsDifferent Momentum Indicators In Forex.

Momentum indicators are heavily used in Forex technical analyses. As a trader you must be familiar with the main ones. They used in order to determine a change in momentum, and assess the relative levels of greed and fear in the Forex market. Currency pairs surge and retreat, ebb and flow. Such movements are analyzed by some the most powerful oscillators, and leading indicators. Below are some of the most used Forex momentum indicators you should know.

Stochastic Oscillator (SO).
This is one of the most used momentum indicators. The Stochastic Oscillator (SO) compares a Forex pair’s closing price to its price range during a particular period of time. The theory behind the SO states that the prices close near the highs during an uptrend. On the other hand they close near its lows during a downtrend.

Relative Strength Index (RSI).
Relative Strength Index or RSI (Read more about the RSI) is very popular among Forex traders. It evaluates the total amount of recent price gains against the total losses. That, in order to identify oversold and overbought conditions of a currency pair. If the RSI, on a scale of 0 to 100, is over 70, it signifies that the pair is overbought. whereas if it’s below 30, it indicates that the cross is oversold.

Momentum Indicators - forex trendyStochRSI.
StochRSI combines the Stochastic Oscillator and the Relative Strength Index momentum indicators. Thus, producing a better picture of the current forex trend. This leading indicator helps traders to gauge whether the RSI is in overbought or oversold zone. Even if it’s hovering between signal levels of 30 and 70.

The TRIX is another indicator of the momentum indicators family. It displays the current rate of change of a triple exponentially smoothed MA of a pair’s closing price. The Trix specifically designed to cancel out the price actions insignificant to the major trend. The investors specify an MA period and also the cycles shorter than those being filtered out.

Commodity Channel Index (CCI).
cci momentum indicatorThe CCI oscillator compares the relationship between the pair’s price, an MA of the price, and deviations from that MA. That, in order to find out whether the pair has entered oversold or overbought zone. (Learn more about the – Commodity Channel Index).

Price Rate of Change (ROC).
The ROC is a momentum indicator which calculates the percentage rate of change. Thus, it indicates the strength of the trend’s momentum. The time-frame considered varies between the recent price and the price over certain periods. Therefore, ROC helps to identify bullish or bearish divergences in the market’s trend.

Learn about the The Absolute Breadth Index (ABI Indicator)

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11 thoughts on “Momentum Indicators in Forex Technical Analysis

    • Hey, One, maximum two momentum indicators. You should use them on different time frames, and in conjunction with other indicators, such as trend lines, candlestick patterns etc.

  1. Just wanted to say thank you for sharing all this information. I’m new to forex and like to learn anything there is about it before i start on a live account

    • Hey Luis, Definitely! You can use it on the MetaTrader 4 platform. You can trade there binary, but you can absolutely use it for your analysis.

  2. Ha! I didn’t know there is such thing as StochRsi, it would have some me so much time cause i can never decide if to use the Stochastic or Rsi lol i guess here’s the solution!

    • You are welcome Edna, thank you for your feedback. If you have any questions about trading analysis feel free to ask!

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