Trading with the momentum Indicator:
Trend Following
Some like trading with the strength in the Spreadbetting markets and take a long or short position once the Momentum indicator crosses the 50 line. The momentum indicator can be used in both scalping and swing trading. In scalping it would indicate in which direction to spread trade.
Long trade: when the momentum indicator crosses the an absolute value, (often the 50) line to the upside
Short trade: when the momentum line crosses to the downside.
Closing your trade. The momentum indicator is not a good indicator to use to close our trade, because by the time it crosses the 50 line again, most of our profits have been eaten away. You should apply always your money management rules, and look for the when the moment indicator is turning, this would be
Divergence Trading
The momentum indicator is a strong divergence indicator, as prices diminish on their uptrend or down trend velocity the momentum indicator will start turning, thus forming divergence. This is an important concept in technical analysis, the velocity of the price movement is a leading indicator in a change of trend.
Bullish Divergence can indicate the end of a down trend.
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