V. 20:4 (32-36): Do Momentum Indicators Follow Trends? by Clive Roffey, Ph.D.
Product Description
Do Momentum Indicators Follow Trends? by Clive Roffey, Ph.D.
Do momentum indicators follow trends, or are they independent of them?
The stochastic oscillator, relative strength index (RSI), rate of change (ROC), and moving average convergence/ divergence (MACD) are some of the most commonly used indicators. It’s not surprising to find traders lumping them all together into the generic category of “momentum indicatorsY´.” Although each indicator is recognized as having its own distinctive characteristics, it is often assumed, misleadingly, that they can be interpreted in a similar fashion.
For example, when you extend the time frame of the rate of change indicator, its oscillation amplitude increases. But when you extend the time frame of its cousin, the RSI, the opposite happens: The amplitude decreases. This occurs to the extent that the accepted 70/30 overbought and oversold levels of the RSI have to be contracted to 60/40.
Do momentum indicators follow trends, or are they independent of them?
The stochastic oscillator, relative strength index (RSI), rate of change (ROC), and moving average convergence/ divergence (MACD) are some of the most commonly used indicators. It’s not surprising to find traders lumping them all together into the generic category of “momentum indicatorsY´.” Although each indicator is recognized as having its own distinctive characteristics, it is often assumed, misleadingly, that they can be interpreted in a similar fashion.
For example, when you extend the time frame of the rate of change indicator, its oscillation amplitude increases. But when you extend the time frame of its cousin, the RSI, the opposite happens: The amplitude decreases. This occurs to the extent that the accepted 70/30 overbought and oversold levels of the RSI have to be contracted to 60/40.
FOR THOSE ORDERING ARTICLES SEPARATELY:
*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store.traders.com users can view the S&C Digital Edition in the subscriber's section on Traders.com.
| Take Control of Your Trading. |
| Professional Traders' Starter Kit |
| All these items shown below only $299.99! |
| Click Here to Order |