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Inertia Trading Analysis and Inertia Trading Signals

Created by Donald Dorsey and was originally used to trade Stocks & Commodities market, before traders took it & started trading the market using this technical indicator.

Dorsey chose to name it "Inertia" because of his interpretation of the price trend. He claimed that a market trend is the overall result of inertia and thus it takes more momentum for a trending market to reverse its direction than to continue heading in the same direction. Hence, a market trend is the measurement of market inertia. This is an oscillator trading that uses the scale of zero to a hundred. Signals are generated using the 50 level center-line cross-over strategy.

Inertia Indicator - MT4 Inertia Indicator - XAUUSD Inertia Buy & Sell Signals Indicator

In physics, the term Inertia is defined in terms of mass & direction of motion. Using the standard trading analysis, the direction of motion of the trend can be easily defined. However, the mass cannot be easily defined. Dorsey claimed that the volatility of a financial instrument might be the simplest & the most accurate measurement of inertia. This theory led to the use of the Relative Volatility Index (RVI) as the basis to be used as a trend technical indicator. Therefore Inertia technical indicator is comprised of: RVI smoothed by a linear regression.

Gold Analysis and How to Generate Signals

In trading the market using this indicator, the signals generated are fairly simple to interpret. Below are 2 examples displayed using charts showing how buy & sell trading signals are generated using Inertia.

Bullish Buy Trade Signal

If the Inertia is above 50, positive inertia is indicated, this therefore defines the long term trend as upward as long as the technical indicator remains above 50. When it crosses to levels below 50 then this is interpreted as an exit signal. The chart below illustrates an example of how a buy trade signal gets generated.

Bullish Signal - MT4 Inertia Indicator - Analysis of Inertia Indicator

Upward Trend - Bullish Signal

Bearish Sell Trading Signal

If the Inertia is below 50, negative inertia is indicated, this therefore defines the long term trend as downward as long as the technical indicator remains below 50. If it goes above 50 then this is interpreted as an exit signal. The chart below shows how a sell trading signal generated.

Bearish Signal - Inertia Indicators for Intraday Trading - No Nonsense Inertia Indicator

Downwards Trend - Bearish Signal

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