Inertia Technical Analysis & Inertia Signals

Developed by Donald Dorsey and was traditionally used to trade Stocks and Commodities market, before traders took it and started trading the markets using this trading indicator.

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

In physics, the term Inertia is defined in terms of mass and direction of motion. Using standard technical analysis, the direction of motion of the trend can be easily defined. However, the mass can't 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 trading indicator. Hence Inertia indicator is comprised of: RVI smoothed by a linear regression.

Gold Technical Analysis and Generating Signals

When it comes to trading the market using this indicator, the trade signals generated/derived are fairly simple to interpret. Below are two example shown using charts showing how buy & sell trade signals are generated using Inertia.

Bullish Buy Trading Signal

If the Inertia is above 50, positive inertia is indicated, this thence defines the long term trend as upward as long as the technical indicator remains above 50. When the indicator crosses to levels below 50 then this is interpreted and viewed as an exit trading signal. The chart below shows an example illustration of how a buy signal is generated.

Upward Trend - Bullish Signal

Bearish Sell Signal

If the Inertia is below 50, negative inertia is indicated, this thence defines the long-term trend as downwards as long as the technical indicator remains below 50. If it crosses above 50 then this is interpreted and viewed as an exit trading signal. The chart below illustrates and shows how a sell trade signal generated.

Downwards Trend - Bearish Signal

Study More Tutorials & Courses:

• How to Use MT4 Alligator in MetaTrader 4 Software Platform
• Keltner Bands MT4 Indicator Shown
• RSI MetaTrader 5 Indicator Cross-over Signal
• How Do I Place S&P in MT5 S&P App?
• Drawing Fib Extension Levels on Upward and Downward Trend
• Hull Moving Average MT5 Indicator Analysis in Trading Charts
• How Do I Create & Write a Forex System Template?
• What's the Value of 100 Pips for Micro Account?
• Used Gold Leverage
• MT4 Parabolic SAR Indicator for Day Forex