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Inertia Technical Indicator

Developed by Donald Dorsey and was originally used to trade Stocks & Commodities market, before currency traders took it and started trading the Forex market using this technical indicator.


Dorsey chose to name it "Inertia" because of his interpretation of the market trend. He claimed that a Forex market trend is the overall result of inertia and thus it takes more momentum for a trending market to reverse its direction than to continue moving in the same direction. Therefore, a Forex trend is the measurement of market inertia. This is an oscillator Indicator that uses the scale of zero to a hundred. Signals are generated using the 50 level center line crossover method.

 

Inertia Technical Indicator - Forex Trading Indicator

Inertia Technical Indicator


In physics, the term Inertia is defined in terms of mass & direction of motion. Using the standard technical analysis, the direction of motion of the trend can be easily defined. However, the mass cannot be easily defined. Dorsey claimed that the volatility of a financial instrument may be the simplest & the most accurate measurement of inertia. This theory led to the use of the Relative Volatility Index (RVI) as the basis to be used as a trend indicator. Therefore Inertia is comprised of: RVI smoothed by a linear regression indicator.

 

 

Technical Analysis of Inertia

When it comes to trading the currency market using this indicator, the signals generated are fairly simple to interpret. Below are two examples illustrated using currency trading charts showing how buy and sell signals are generated using this indicator.


Upward Trend - Bullish Buy Signal

If the Inertia is above 50, positive inertia is indicated, this therefore defines the long-term Forex trend as upward as long as the indicator remains above 50. When it crosses to levels below 50 then this is interpreted as an exit signal. The chart below shows an example of how to trade currency charts using this indicator so as to generate a buy signal.

 

Upward Trend- Bullish Forex Signal

Upward Trend - Bullish Signal

 

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Downward Trend - Bearish Sell Signal

If the Inertia is below 50, negative inertia is indicated,this therefore defines the long-term forex trend as downwards as long as the indicator remains below 50. If it goes above 50 then this is interpreted as an exit signal. The currency chart below shows a sell signal generated using this indicator.

 

Downward Trend- Bearish Forex Signal

Downward Trend - Bearish Signal

Market Sentiment 2015:

Quantitative Easing(QE): This is when a Central Bank decides to start printing money to buy Bonds so as to stimulate Economic Growth.

ECB QE: ECB, Euro Zone Central Bank has started Quantitative Easing for Euro Zone so as to stimulate growth in the EU, devalue the EURO and also bring inflation up to around 2 %.

What it Means: This means the value of the EURO is going to depreciate against all other currencies. (Not at once, but gradually)

How Long will the QE Last: From March 2015 to September 2016.

Market Outlook: Very Bearish for EURUSD and EURJPY, - Also for GBPUSD, GBPJPY, and AUDUSD (No Need For Technical Analysis).

Do Not Be Left by This Once in a Lifetime Opportunity: Open an account now and start selling Euros - ECB has got your back on this one - 1.1 Trillion Euros is What Has Been Set For This QE. - Others are already profiting - Read the article How to Fast Track Account Opening and Open an account now.

Strategy: Sell the retracements and use 1 Hour and M15 Charts to look for best entry and exit points.

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