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