Momentum Technical Analysis and Momentum Oscillator Signals

Momentum indicator uses math equations to calculate the line of plotting. Momentum measures the velocity with which price changes. This is calculated as a difference between the current price candle-stick and the average price of a selected number of price bars ago.

Momentum represents the rate of change of the price over those specified time periods. The faster that prices rises, the bigger the increase in momentum. The faster that xauusd trading prices decline, the bigger the decrease in momentum.

As the price movement starts slowing down the momentum will also begin to slow down & return to a median level.

Momentum

Gold Analysis & Generating Signals

This indicator is used to generate technical buy and sell signals. The three most common methods of generating trading signals used in xauusd are:

Zero Centerline Gold Cross Overs Trade Signals:

• A buy signal is generated when Momentum crosses above zero
• A sell signal is generated when Momentum crosses below zero

Oversold/Overbought Levels:

Momentum is used as an overbought/oversold indicator, to identify potential overbought & oversold levels based on previous readings: the previous high or low of the momentum is used to figure out the overbought & oversold levels.

• Readings above the overbought level mean the xauusd is overbought and a price correction is pending
• While readings below the oversold level the price is oversold and a price rally is pending.

XAUUSD Trend Line Break Outs:

XAUUSD Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum begins to turn before price thereby making it a leading indicator.

• Bullish reversal - Momentum readings breaking above a downward trend line warns of a possible bullish reversal signal while
• Bearish reversal - momentum readings breaking below an upward trend line warns of a possible bearish reversal trading signal.

Technical Analysis in Gold Trading