Momentum Gold Trading Analysis and Momentum Oscillator Trading Signals
The momentum indicator uses math equations to calculate the line of plotting. Momentum measures velocity with which xauusd price changes. This is calculated as a difference between the current xauusd price candle & the average xauusd price of a selected number of xauusd price bars ago.
Momentum represents the rate of change of the xauusd price over those specified time periods. The faster that xauusd prices rises, the bigger the increase in momentum. The faster that xauusd prices decline, the bigger the decrease in the momentum.
As the xauusd price movement starts slowing down the momentum will also start to slow down and return to a median level.
Momentum
Gold Analysis and Generating Trading Signals
This indicator is used to generate technical buy & sell signals. The three most common methods of generating trading signals used in gold trading are:
Zero Centerline Gold Trading Crossovers XAUUSD Trading Signals:
- A buy signal is generated when Momentum crosses above zero
- A sell signal is generated when Momentum crosses below the zero
Overbought/Oversold 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 and oversold levels.
- Readings above the overbought level mean gold is overbought and a xauusd price correction is pending
- While readings below the over sold level the xauusd price is oversold and a xauusd trading price rally is pending.
Gold Trend Line Breakouts:
Gold Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum begins to turn before xauusd price thereby making it a leading indicator.
- Bullish reversal - Momentum readings breaking above a downwards trend-line warns of a possible bullish reversal gold signal while
- Bearish reversal - momentum readings breaking below an upward trend line warns of a possible bearish reversal xauusd trading signal.
Technical Analysis in Gold Trading
