In Forex (FX) trading if you want to succeed and make money you need to learn and understand all the tricks of the trade. The professionals come up with their own techniques using various indicators for assistance and then they derive mechanisms for various situations. The situations are read clearly through indicators. Among the chief indicators that are used are momentum indicators. These indicators are extremely useful in determining changes in price. The Momentum Indicators also known as “Oscillators” help gauge how price changes are sustained and the likelihood of reverses in price movements.
The values received from momentum indicators can be interpreted in many ways. The key is to interpret the values correctly. Wrong interpretations can have drastic consequences. Like all other forms of trade there is luck involved in FX trade as well.
While interpreting momentum indicator values, remember that the +ve Values that are on the rise suggest that prices are rising which should tell you that buyers are actively buying. When the momentum values are indicating slow movement this means that the price is moving up slowly, indicating that buyers have started exiting. If the values are indicating a drop then that means price is declining and sellers are selling.
Remember that momentum indicators are actually indicators they do not work like mystics behind crystal balls telling fortunes. Do not reply completely on them; always wait for confirmation by actual price movements before entering or exiting a trade.
The most widely used indicators used by FX traders are the Relative Strength Indicator commonly referred to as the RSI Oscillator. The 2nd favourite is the Stochastic Oscillator which suggests the current relative value of the price in comparison to the price range over a given time span. The third is the Moving Average Convergence Divergence (MACD) oscillator which is actually not a momentum indicator but indicates numerous moving averages and is similar in nature to a momentum oscillator.
