What Is Momentum Indicator

The Momentum indicator is a speed of movement indicator designed to identify the price movement’s speed (or strength). The momentum indicator compares the most recent closing price to a previous closing price (can be the closing price of any time frame)

MI Indicator

As the name suggests, the momentum indicator uses momentum to determine the strength or weakness of a stock’s price. Measuring the rate of the rise or fall of stock prices can help traders enter or exit the market efficiently. 

How To Calculate Momentum Indicator

Formula:- M = CP – CPn

M is a comparison between the current CP and a closing price “n” periods ago CPn.

Why Use Momentum Indicator

The Momentum Indicator compares the most recent to a previous closing price on any time frame and is shown as a single line on its own specialised chart separating it from the price bars. As the momentum indicator determines whenever the price is moving downwards, upwards, and by how much – traders can use it as a trading signal or let it help confirm trades base on the price action.

How To Use Momentum Indicator

Bullish Scenario:- When MI value goes positive, i.e. it moves above 0, it is considered a bullish scenario indicating the momentum of the prices is going upwards.

Bearish Scenario:- When the MI value goes negative, i.e. it moves below 0, it is considered a bearish scenario indicating the momentum of the prices is going downwards.

Building Momentum Indicator Trading Strategy On Mudrex

Strategy:- 

BUY:- MI crossesup 10 with a signal period of 10 days.

SELL:- MI crossesdown (-10) with a signal period of 10 days

TIME FRAME:- 1 Day

Creating on Mudrex:- 

We will use 2 MI indicator blocks. One for selling and One for buying.

For buying, we will use the following settings:-

For selling, we will use the following settings:-

Final Strategy:-

Testing:- 

Running on Binance Futures: BTC/USDT with tick interval of 1Day yielded an overall profit of 224.47%

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