Momentum Technical Analysis and Momentum Oscillator Trading Signals

Momentum indicator uses mathematical equations to calculate line of plotting. Momentum measures velocity with which price changes. This is calculated as the difference between the current price candlestick 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 slowing down the momentum will also start to slow down and return to a median level.

Momentum

XAGUSD Trading Analysis and How to Generate Trade Signals

This indicator is used to generate technical buy & sell trading signals. Three most common techniques of generating trading signals used in silver trading are:

Zero Centerline XAGUSD Trading Cross Overs Trade Signals:

• A buy signal is generated when Momentum crosses above zero
• A sell signal is generated when Momentum crosses below 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 & oversold levels.

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

Trend Line 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 trading signal.

Analysis in Silver Trading