Most novice traders are looking for an extremely easy to use and at the same time effective indicator. However, they face a problem sooner or later: most of the instruments are late. So the deals are made when movement ends, resulting in losses.
Momentum will help to avoid the above described troubles. The indicator is suitable for absolutely all categories of traders and gives advanced signals. That is why it is on the list of standard instruments in most trading platforms and in the Pocket Option terminal, too.
Main parameters and appearance of instrument
Momentum is in “Oscillators” section in the Pocket Option platform. This means that indicator will act in a separate window under the chart.
Like most representatives of this class of instruments, it consists of key levels and a signal line.
The formula for calculating the indicator is the ratio of current value of asset to the one that was n periods ago. The default period is n = 14. Traders can use these settings on any timeframe.
The key level is at 100 points in this case. Trader using this line can determine if indicator is rising or falling.
The logic of Momentum indicator:
- If signal line is growing and is above level of 100, then an increase in the price of asset is observed in market.
- If indicator is falling and is below key line, then the price of asset falls.
Momentum indicator works in advance and this is its main advantage. Therefore, thanks to its signals, trader can foresee the future behavior of price.
However, Momentum like most instruments is not recommended for use during news releases. It can give a lot of false signals at this moment. Therefore, if trader uses this indicator in strategy and trades according to rules of technical analysis, then it is recommended to stop buying contracts before publishing important events.
How to buy options using Momentum signals?
Many traders use the above instrument to buy contracts without supporting their actions with additional signals. This system is quite profitable as the indicator is active.
However, if trader wants to receive better signals and reduce risks to a minimum, then he needs add any trend indicator, for example, EMA. So, user will use only those entry points that coincide with direction of trend.
How to trade Momentum oscillator on electronic contracts is as follows:
- The Call contract must be acquired at the moment when the signal line intersects the 100 level upward. At the same time, candles should be above EMA (uptrend).
- The Put option is bought at the moment of crossing the 100 level downward. Trend in this case should be downward (candles under the EMA).
Expiration time in deal should be no less than the formation time of 3-4 candles to reduce the impact of market noise.
As a result, even a novice trader will be able to use Momentum to trade electronic contracts with Pocket Option. This indicator can be called universal, as it is suitable for work on any timeframe. And by comparing its signals with one of trend instruments, trader will significantly reduce the risk of losing the deposit.