Squeeze Momentum Indicator – Riding along the strength of the market
Trading forex can be exhilarating, comfortable, and entertaining if you are profitable. While the goal of every trader is to be profitable, not many achieve this goal on a long-term. For most newbies, they can become lost and confused when things don’t go their way. It becomes a daunting task when there is no consistency in their trading results. Hence, Squeeze Momentum Indicator can be the light in the dark tunnel.
Trading forex can be exciting, unusual, fun and profitable, especially if your trades are bringing you the results you want. Some conclude that the market is a scam and works randomly; for others, the forex broker is reaping them from their hard-earned money. The truth is the market isn’t random, and your broker is not perfect, but these are excuses for not perfecting your skill.
What strategy are you using to trade? Are you applying indicator in your trading chart? What kind of indicator are you using? Are you a momentum or trend trader? These are just a few questions to ponder about because if you stick to a working strategy you have discovered, you will be consistent in your result.
For new traders, Momentum seems the right way of trading, but they find it hard to know the particular indicator to use. Besides the Squeeze Momentum Indicator, there are other top 10 mt4 indicators such as Moving average, stochastic, relative strength index, etc.
What is momentum trading?
Momentum trading is a trading strategy where traders buy or sell currency pairs according to the strength of the recent price trend. Did you remember your science class in school where you talked about Momentum? Well, that Momentum involves the mass of an object multiplied by its velocity; then you can get the direction the object will travel.
However, in the financial or trading market, to get the Momentum of an asset, you have to put various factors into consideration such as the rate at which the price change, trading volume, etc. An experienced trader will tell you that a particular currency pair will move towards a direction strongly and it will until it loses its strength. At times, it involves using various indicators such as the Squeeze Indicator, average directional index, and on balance volume indicator.
Essential Indicators to track Momentum
A standard tool to help determine the moment of a financial asset is the momentum indicator. Indicators shouldn’t be something new to you if you have been in the forex market. However, indicators are graphical tools that help traders to predict the market.
Here, we will examine some of the momentum indicators you can incorporate in your trading strategy.
Squeeze Momentum Indicator
The Squeeze Momentum Indicator is a custom indicator that traders use to trade Momentum. The indicator comprises of green and red dots within the zero line, which signifies the presence of a squeeze. When it shows the green dot, it means there is no squeeze condition currently, whereas a red dot represents the presence of a squeeze.
The indicator is a combination of the Keltner channels, Bollinger Bands, and momentum oscillator. When the volatility level of the market is low, the Bollinger bands narrow and trade inside the Keltner channels. It will lead to contraction to a certain level pending when the energy cannot contain it. When the Bollinger bands squeeze itself out from the Keltner channel, it explodes higher. You can use the squeeze momentum indicator with other premium ones like the waddah attar explosion indicator for better trading entries.
Finally, you can use the momentum indicator to time directional moves in the market. Furthermore, you can stay out of selling position when you anticipate an upcoming directional movement.
The moving average is a prominent indicator among traders to identify the overall Momentum and price trend of the market. It is easy to read with adjustable settings to suit your trading style. The indicator adds the closing prices of a given period while dividing it by the number of the period under consideration.
Depending on your trading strategy, you can use the simple moving average, exponential moving average, and the weighted moving average. However, most traders are familiar with the simple and exponential moving averages.
Moving Average Convergence divergence
Popularly called the MACD, the momentum indicator compares fast and slow-moving exponential moving averages against a single line. It shows both price momentum and the possible area price might reverse. Whenever the lines are far from each other, it indicates that the market has strong Momentum. However, when they are converging, it means a slow momentum with the price likely to reverse.
It looks like the Squeeze Momentum Indicator but doesn’t follow the combination of two different indicators. Traders use the signal line of the MACD to trade the forex market. The indicator uses three exponential moving average and reacts to price quickly. The MACD indicator is touted as one of the best indicators for new traders to use.
Average Directional Index (ADX)
Another reliable momentum indicator you can use to trade Momentum beside the squeeze indicator is the average directional index indicator. The indicator aims to identify the Momentum of a trend. It plots the price strength of a trend on a graph with values ranging from 0 and 100.
Whenever the momentum value is below 30, it indicates an undefined trend whereas values above 30 signify a solid trend towards the market direction. When the value approaches 100, the strength of the Momentum gets stronger.
ADX indicator MT4 is not the only used for verifying the strength of a currency pair; you can as well use it as a range finder. Most times, when prices move from a trending situation, it tends to go into a state of consolidation – range. With the ADX indicator, you can easily know when the market is ranging pending when the market changes direction again.
Conclusion Of Squeeze Momentum Indicator
Momentum is an important concept, which over time is proven to be valuable in anticipating the direction of a trend. The Momentum of a market can be short-term or long-term, depending on the current state of the market. However, there are several technical tools available to determine the strength of the trend.
These tools include the squeeze momentum, the moving average, the Moving Average Convergence divergence, and the average directional index indicator. With the indicators mentioned above, knowing the strength of the market becomes easy.
Are you still having challenges trading the market profitably? Whatever the challenge might be, you have the opportunity to take advantage of essential tools and indicators. We have designed tools to help your trading get better even if you are a newbie. Check these out via this link and can change your trading story to an inspiring on for upcoming traders.
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