Momentum Bitcoin Analysis & Momentum Oscillator Trading Signals
Momentum technical indicator uses mathematical equations to calculate line of plotting. Momentum measures the velocity with which bitcoin price changes. This is calculated as a difference between the current bitcoin price candlestick and the average bitcoin price of a chosen number of bitcoin price bars ago.
Momentum represents the rate of change of the bitcoin price over those specified time periods. The faster that bitcoin prices rises, the bigger the increase in momentum. The faster that bitcoin prices decline, the bigger the decrease in momentum.
As the bitcoin price movement begins to slowdown the momentum will also begin to slowdown & return to a median area.
Momentum
Bitcoin Analysis & Generating Trading Signals
This indicator is used to generate technical buy & sell cryptocurrency signals. Three most common methods of generating trading signals used in bitcoin trading are:
Zero Centerline Bitcoin Trading Crossovers BTCUSD Trading Signals:
- A buy cryptocurrency signal is generated when Momentum crosses above zero
- A sell cryptocurrency signal is generated when Momentum crosses below zero
Overbought/Oversold Levels:
Momentum is used as an overbought/oversold indicator, to identify potential overbought and oversold levels based on previous readings: the previous high or low of the momentum is used to determine the overbought & oversold levels.
- Readings above the overbought level mean bitcoin is overbought and a bitcoin trade price correction is pending
- While readings below the oversold level the bitcoin price is oversold & a bitcoin price rally is pending.
Bitcoin Trend-Line Break-outs:
Bitcoin Trend lines can be drawn on the Momentum indicator connecting the peaks and troughs. Momentum begins to turn before bitcoin price therefore making it a leading indicator.
- Bullish reversal - Momentum readings breaking above a downward trendline warns of a possible bullish reversal cryptocurrency signal while
- Bearish reversal - momentum readings breaking below an upward trend line warns of a possible bearish reversal bitcoin signal.
Technical Analysis in Bitcoin Trading
