Momentum Indicator for MT4

April 5, 2022

1782

Introduction to the Momentum Indicator

Oscillators can be an objective basis for identifying possible momentum reversals. Traders can easily identify momentum reversals based on objective rules that can be observed from an oscillator.

The Momentum Indicator is an oscillator which uses a complex formula based on other oscillators and indicators. It is a tool which can provide objective indications of probable momentum reversals.

What is the Momentum Indicator?

The Momentum Indicator is an oscillator type of technical indicator which indicates trend and momentum direction. It is derived from various underlying indicators such as the classic Momentum Indicator, Stochastic Oscillator, and Moving Averages.

Although this indicator is named Momentum Indicator, it is different from the basic Momentum Indicator which is available as a preinstalled indicator on the MT4 platform.

This version of the Momentum Indicator plots two lines which oscillate within the range of zero to 100, much like the Stochastic Oscillator. However, its oscillations are smoother compared to the tight oscillations of the Stochastic Oscillator.

Its main oscillator line is the solid line, while the dashed line is called the signal line. Momentum direction is indicated by how the two lines crossover. A solid line above the dashed line indicates a bullish momentum, while a solid line below the dashed line indicates a bearish momentum.

How the Momentum Indicator Works?

The Momentum Indicator has several underlying indicators used within its algorithm. These are the Stochastic Oscillator, Moving Averages, and Momentum. It also allows users to choose which type of moving average line the indicator would use for its calculations. It plots its main oscillator line and signal line based on a formula which is derived from the indicator values mentioned above.

It can also plot signal arrows based on the change of the slope of the oscillator line or its crossover with the signal line.

How to use the Momentum Indicator for MT4

This indicator has several options and variables which can be modified within its settings.

“TimeFrame” allows users to choose the timeframe the indicator is based on.

“StochasticLength”, “SmoothMA”, “SmoothMAMethod”, “SignalMA”, “SignalMAMethod”, and “MomPeriod” adjusts and modifies the number of periods used on the underlying Stochastic Oscillator, Moving Average, Signal Line, and Momentum, as well as the method used for the calculations.

“Show Arrows” toggles the arrow signals on and off.

“ChangeOnDirectionChange” toggles the signal arrows to be based on the change in slope of the line or its crossover with the signal line.

“Interpolate” allows users to choose the type of moving average line used within the algorithm.

Buy Trade Setup

When to Enter?

Open a buy order as the indicator plots an arrow pointing up and the oscillator crosses above the signal line.

When to Exit?

Close the trade as the indicator plots an arrow pointing down.

Sell Trade Setup

When to Enter?

Open a sell order as the indicator plots an arrow pointing down and the oscillator crosses below the signal line.

When to Exit?

Close the trade as the indicator plots an arrow pointing up.

Conclusion

This indicator may sometimes be lagging. Users can opt to trade on the change of slope direction, but this can also produce false signals. Although the indicator does have lag, it can also be a reliable signal indicator if used in confluence with other technical indications.