The Momentum oscillatorindicator is visually displayed as the line which moves in the particular range above or below the neutral (central) line. If this line is located higher, buyers become stronger in the market, and a trader can buy the Call option. When the line declines lower than the neutral line, sellers will have a priority in the market. In this case, a trader is recommended to buy the Put option. Another several strategies for work with this indicator exist, and you can familiarize with them in more detail in other paragraphs of this article.
Currently, the Momentum binary options’ oscillator is one of the most popular among oscillators. This indicator helps to find out the rate of the price changes. At the same time, it is one of the simplest binary options’ indicators.
The Momentum binary options’ oscillator also belongs to the category of trend indicators. The calculation formula of this indicator is very simple, so there is no need to explain it. If the current prices close higher than the previous ones, then there is the ascending trend in the market. Therefore, if the current prices close lower than the previous ones, the descending trend in the market exists.
In order to slightly smooth the volatility of this binary options’ indicator, the moving averages are applied. Generally speaking, the Momentum oscillator is the leading one indicator in relation to the price chart. In other words, if, for example, the reversal point is forming in the upper part of a chart, it means that the indicator is already reversing down. At the same time, prices can continue moving upwards for some time. As for the reversal of the descending trend to the ascending one, the indicator makes it earlier, warning a trader that the moods in the market will change soon. But the prices may continue moving downwards for some time.
As for the application of this Momentum binary options’ indicator, there are a few variants of it. For example, this auxiliary tool for a trader can act as an oscillator (however, in sober fact, it is not an oscillator). In this case, the purchase of the Put binary option has to be carried out when the indicator’s line reverses after a rise and then starts to decline. As for the Call option’s purchase, it can be carried out when the indicator’s line declines and then reverses and starts moving upwards. As for the levels which have to be reached down or up by the indicator’s line, they will be different in each case and for each particular asset. For this reason, they have to be tested.
Also, the Momentum binary options’ indicator can be used as the trend indicator. In this case, the crossing of the central line appears to be the signal to buy the particular option. For example, if the line is crossed from down to up, it means that the formation of the ascending trend is starting in the market. In this case, it is recommended to buy the Call options. If the indicator’s line crosses the central line from up to down, the formation of the ascending trend is starting in the market. In this case, it is recommended to buy the Put options.
The divergences can be also used in order to analyze a chart using this indicator. For example, if a price reaches maximums that are higher than the previous ones, and the indicator’s lines form new maximums that are lower than the previous ones, this is the bearish divergence. In this case, a trader is recommended to buy the Put options. If the price on a chart reached minimums that are formed lower than the previous ones, and the current minimums on the indicator’s line are higher than the previous ones, then the bullish divergence is forming in the market. In this case, a trader can buy the Call options.