Momentum Gold Trading Analysis and Momentum Oscillator Signals
The momentum indicator uses math equations to calculate the line of plotting. Momentum measures velocity with which xauusd price changes. This is calculated as the difference between the ruling price candlestick and the average price of a selected number of price bars ago.
Momentum represents the rate of change of the price over those particular time periods. The faster that prices rises, the larger the increase in momentum. The faster that prices decline, the larger the decrease in momentum.
As the price movement starts slowing down the momentum will also start to slow down and return to a median level.
Momentum
XAUUSD Analysis and Generating Signals
This indicator is used to generate technical buy and sell signals. The three most common methods of generating signals used in gold trading are:
Zero Centerline Gold Trading Crossovers Trade Signals:
- A buy signal gets generated when Momentum crosses above zero
- A sell signal gets generated when Momentum crosses below zero
Overbought/Oversold Levels:
Momentum is used as an overbought/oversold indicator, to identify potential overbought & oversold levels based on previous readings: the previous high or low of the momentum is used to figure out the overbought & oversold levels.
- Readings above the overbought level mean gold is overbought and a price correction is pending
- While readings below the over sold level the price is oversold and a price rally is pending.
Trend-Line Break-outs:
Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum begins to turn before price hence making it a leading indicator.
- Bullish reversal - Momentum readings breaking above a downwards trendline warns of a possible bullish reversal signal while
- Bearish reversal - momentum readings breaking below an upward trend line warns of a possible bearish reversal xauusd signal.
Analysis in XAUUSD Trading
