Momentum CFD Analysis and Momentum Oscillator CFD Signals

The momentum indicator uses math equations to calculate line of plotting. Momentum measures velocity with which cfds price changes. This is calculated as the difference between the current cfds price candle and the average price of a chosen number of price bars ago.

Momentum represents the rate of change of the price over those specified time periods. The faster that prices rises, the bigger the increase in momentum. The faster that prices decline, the bigger the decrease in the momentum.

As the price movement starts to slow down the momentum will also slow down and return to a median region.

Momentum

CFDs Technical Analysis and How to Generate Signals

This indicator is used to generate technical buy & sell signals. The three most common methods of generating trading signals used in cfd trading are:

Zero Centerline CFDs Trading Crossovers Trade Signals:

• A buy signal is generated when Momentum crosses above zero
• A sell signal is generated when Momentum crosses below zero

Oversold/Overbought Levels:

Momentum is used as an overbought/oversold indicator, to identify potential overbought & oversold levels based on previous readings: the previous high or low of the momentum is used to figure out the overbought & oversold levels.

• Readings above the overbought level mean the cfd is overbought and a price correction is pending
• While readings below the over sold level the price is oversold & a price rally is pending.

Trendline Break Outs:

Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum begins to turn before price therefore making it a leading indicator.

• Bullish reversal - Momentum readings breaking above a downward trendline warns of a possible bullish reversal signal while
• Bearish reversal - momentum readings breaking below an upward trend line warns of a possible bearish reversal cfds trade signal.

Analysis in CFDs Trading