The standard momentum technical analysis indicator measures the rate of change in closing prices and is used to detect trend weakness and likely reversal points.
The standard momentum technical analysis indicator measures the rate of change in closing prices and is used to detect trend weakness and likely reversal points. It is often overlooked because of its simplicity. This is a mistake because it is one of the best day trading indicators in existence.
Our Momentum Multicolor Line and Bars measures the amount that an instrument’s price has changed over a given time span and expresses it as a red-green oscillating line or paint bar tool.
There are basically two ways to use the Momentum Multicolor Line and Bars indicator:
1. You can use the Momentum Multicolor Line and Bars indicator as a trend-following oscillator similar to the Moving Average Convergence/Divergence (MACD). Buy when the indicator bottoms and turns up and sell when the indicator peaks and turns down.
2. You can also use the Momentum Multicolor Line and Bars indicator as a leading indicator. This method assumes that market tops are typically identified by a rapid price increase (when everyone expects prices to go higher) and that market bottoms typically end with rapid price declines (when everyone wants to get out).
As a market peaks, the Momentum Multicolor Line and Bars indicator will climb sharply and then fall off — diverging from the continued upward or sideways movement of the price. Similarly, at a market bottom, Momentum will drop sharply and then begin to climb well ahead of prices. Both of these situations result in divergences between the indicator and price.
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