Momentum Energies Technical Analysis and Momentum Oscillator Trading Signals

Momentum technical indicator uses mathematical equations to calculate line of plotting. Momentum measures the velocity with which energies price changes. This is calculated as a difference between the current energies price candlestick and the average energies price of a chosen number of energies price bars ago.

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

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

Momentum

Energies Technical Analysis and Generating Trading Signals

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

Zero Centerline Energies Trading Crossovers Energy Trading 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 and oversold levels based on previous readings: the previous high or low of the momentum is used to determine the overbought and oversold levels.

• Readings above the overbought level mean the energies instrument is overbought and a energies trading price correction is pending
• While readings below the oversold level the energies price is oversold and a energies price rally is pending.

Energies Trend Line Breakouts:

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

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

Technical Analysis in Energies Trading