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Trading with the momentum indicator on Binomo

The Momentum indicator is an essential tool for traders who are looking to gain insight into the strength or weakness of a particular asset's price movements. By measuring the rate of change of an asset's price, traders can determine whether a trend is gaining or losing momentum, and make informed trading decisions based on that information.

For traders who use price action strategies, the Momentum indicator is especially useful as it provides a clear and concise signal of when to enter or exit a trade. By analyzing the Momentum indicator in conjunction with other technical analysis tools, traders can get a comprehensive view of an asset's price movements and make more informed trading decisions.

The Momentum Indicator

The Momentum indicator is a technical tool that can help predict how the price of a financial instrument will change over time. It works by comparing current and past values to estimate the speed of price movements. Trader can use the signals from the Momentum indicator to make more informed decisions when buying or selling financial instruments.

Momentum Signals for Trend Reversal

When the price reaches the end of a trend, momentum builds to a peak and then changes direction, creating a signal that indicates a likely reversal of the price trend in the future.

Signals for Trend Reversal
Signals for Trend Reversal

Trend Continuation Indicator

This signal requires careful observation before it can be recognized. For instance, there is a phenomenon called the divergence between price and indicator. After this period, prices will likely continue to rise in the future. This means that when the price maintains its uptrend, despite going up or sideways, the Momentum shows signs of a bearish trend.

Trend Continuation Indicator
Trend Continuation Indicator

When the price is decreasing or moving laterally (in a downtrend) but the Momentum is increasing (on a bullish trend).

Momentum is increasing
Momentum is increasing

How to Use Momentum Indicator in Binomo

  1. Open the Indicators menu
  2. Select the Momentum indicator
Momentum Indicator in Binomo
Momentum Indicator in Binomo
  1. Choose the number of candles that Momentum computed
Choose the number of candles
Choose the number of candles

Next, set the color, and then click Apply to finish.

Trading Strategy with Momentum Indicator in Binomo

To improve trading strategies, trader can combine other indicators or signals with the two signals provided by Momentum.

Trading with Candlestick Colors

To trade, look for reversal candlestick patterns that confirm a trend reversal, which Momentum signals earlier. Trader will need a 5-minute Japanese candlestick chart, a Momentum indicator, and open deals based on the candlestick colors. For example, for UP deals, wait until Momentum forms a trough and then goes up, and look for bullish reversal candlestick patterns such as Bullish Engulfing or Bullish Harami.

Trading with Candlestick Colors
Trading with Candlestick Colors

When Momentum forms a peak and then starts to go down, it can indicate that prices will fall. This is often seen with Bearish Engulfing or Harami candlestick patterns.

Momentum starts to go down
Momentum starts to go down

Combining Long-Term Deals with Reversal Candlestick Patterns

Long-term deals are trades with an expiration time of 15 minutes or more. To enter a trade, look for divergence between the Momentum indicator and the price. A reversal signal can be identified by a special candlestick pattern, such as Morning Star, Tweezer, or Engulfing. To open an UP trade, look for bullish Momentum divergence and a bullish reversal candlestick pattern, such as Bullish Harami, Pin Bar, or Morning Star.

Combining Long-Term Deals
Combining Long-Term Deals

To open DOWN deals, look for a bearish Momentum divergence and a bearish reversal candlestick pattern like Bearish Harami, Pin Bar, Evening Star, etc.

Open DOWN deals
Open DOWN deals

This article introduced a basic indicator. To practice using the Momentum indicator, create a demo account today.

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