Indicators Of A Trend And Price Components

Momentum

Momentum is probably the most elementary form of the trend indicator, thus it is theoretically proved and intuitively clear. It estimates a direction of closing of the prices and uses for calculation for only closing prices.

For calculation of Momentum at first it is necessary to define the time period during which you awake to define trend presence. Then today’s closing is compared to closing in the beginning of the time interval chosen by you. In our case it is necessary to compare today’s closing to closing 34 days ago. If today’s closing more low, means a trend is directed downwards. If today’s closing above, means a trend is directed upwards. If closings are equal, the lateral trend means available.

The similar approach does not contradict common sense. If the 34-day trend is directed upwards, unless it is not logical to expect, that tomorrow’s closing will be above, than 34 days ago? Unless it is not that called a word “trend”? It is the simple indicator, suitable for use at fast schedules overview. Choose the time interval and become the expert in trends.

Use based on Momentum trading system gives profit on half of markets and the general profit made $42.

Directional Movement

This method of identification of trends has been developed in 1978. In difference from Momentum which uses only with the closing prices, Directional Movement uses only with the maximum and minimum prices. It is combined enough mathematically and consequently and you cannot use it for fast survey of schedules.

Directional movement evaluates that part of a today’s bar which acts concerning a yesterday’s bar. If today’s maximum and a floor price more yesterday’s that part of a today’s bar which acts upwards concerning a yesterday’s bar is considered for movement upwards. If today’s maximum and a floor price less yesterday’s that part of a today’s bar which acts downwards concerning a yesterday’s bar is considered for movement downwards. For inside day (when a today’s maximum less than yesterday’s, and a today’s minimum more than yesterday’s) the movement direction is not advanced. For outside day (when a today’s maximum more yesterday’s, and a today’s minimum less yesterday’s) direction of movement is advanced by the most acting part of a today’s bar concerning the yesterday’s. Movement upwards is evaluated with a plus, movement downwards with a minus sign.

For indicator calculation the total sum of directions of movements for a certain space of time is advanced. If it is positive, the trend upwards means available. If it is negative it is downwards. As well as with Momentum, the given concept is intuitively clear. If price moves upwards, it is necessary to expect prevalence of new maxima concerning the last days and the other way opposite.

If you want to participate in forex trading should start from learning the basics of currency exchange market to make sure you do not experience problems with this industry.

There is another option – you can hire experienced traders to do this job for you – read more about forex investment here. Also make sure to search for the knowledge in a good forex book.