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Momentum is an indicator of market movement and strength of trends. In this article we will describe the ways to use this indicator in your trading.

Calculation
The Momentum indicator is calculated in two main forumulas:
Momentum = Close of bar - Close of previous bar
Momentum = Close of bar / Close of previous bar * 100.

The first formula shows the difference of price in pips - while the second one shows the difference in percent. The second formula is also referred as the Rate Of Change Indicator. In this article we will refer to the second formula.

The indicator is smoothed with a Moving Average, usually of 14 periods.

 Absolutely NO THINKING is needed, just buy when Blue and sell when Red!

Trading
There are several ways of trading with the Momentum indicator. Most of them are described in Martin Pring's great book - 'On Market Momentum'. Here we will describe the most profitable ones:

Center-line Cross - This trading method is quite simple.
Long trades are entered when Momentum crosses its center-line from below - the value of 100.
Short trades are entered when Momentum crosses its center-line from above.

This is a trend-following approach to using this indicator.

Trend-Line Break
Another way of trading this indicator is the Trend-Link-Break. In this method, the traders draws trendlines at the Momentum chart and enters when trendlines break. This is a contrarian way of trading this indicator.

By trading breakout of trendlines at the Momentum, trader can spot breakouts even though they do not appear at the chart at all.

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