Momentum Technical Analysis and Momentum Oscillator Signals
Momentum uses math equations to calculate the line of drawing. Momentum gauges the velocity with which the price changes. This is calculated as a difference between the ruling 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 particular time periods. The faster that the prices rises, the larger the increase in energy. The faster that gold prices decline, the larger the decrease in strength.
As the price movement starts slowing down the momentum also will begin to slow down and return to a median level.
Momentum
XAU/USD Analysis and Generating Signals
This indicator is used to generate technical buy and sell signals. The 3 most common methods of generating trading signals used in xauusd are:
Zero Centerline Gold Cross Overs Signals:
- A buy signal is generated/derived when Momentum crosses above zero
- A sell signal is derived/generated when Momentum crosses below the zero level
Oversold/Overbought Levels:
Momentum is used as an overbought/oversold indicator, to identify the potential overbought and over-sold levels based on previous readings: the previous high or low of the momentum is used to figure out the over-bought and 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.
XAU/USD Trend Line Break Outs:
XAU/USD Trend lines can be drawn on the Momentum connecting/joining these peaks and troughs. Momentum starts to turn before price hence making it a leading indicator.
- Bullish reversal - Momentum readings breaking above a downward trendline warns of a possible bullish market reversal signal while
- Bearish reversal - momentum readings breaking below an upward trend line warns of a possible bearish reversal.
Technical Analysis in XAUUSD Trading
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