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Inertia Technical Indicator

Developed by Donald Dorsey and

Was originally used to trade Stocks & Commodities market, before forex traders took it and started trading the forex market using this technical indicator.


Dorsey chose to name the indicator "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. The Inertia 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 - Forex Trading 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) Indicator as the basis to be used as a trend indicator. Therefore Inertia indicator is comprised of: RVI Indicator smoothed by a linear regression indicator.

 

 

Technical Analysis of Inertia Technical Indicator in Forex Trading


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

Upward Trend- Bullish Forex 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 the indicator crosses to levels below 50 then this is interpreted as an exit signal. The chart below shows an example of how to trade forex charts using the inertia indicator so as to generate a Forex buy signal.

 

Upward Trend- Bullish Forex Signal

Upward Trend on Forex chart- Bullish Forex Signal

 

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Downward Trend- Bearish Forex 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 the indicator goes above 50 then this is interpreted as an exit signal. The Forex chart below shows a sell Forex trading signal generated using the inertia technical Forex indicator.

 

Downward Trend- Bearish Forex Signal

Downward Trend- Bearish Forex Signal

 

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