Momentum indicators are used for trading the financial markets. The most common momentum indicators include the relative strength index (RSI) and the moving average convergence divergence (MACD) indicator.
You can use momentum indicators in your trading to identify the potential strength or weakness of an asset price you want to trade.
In this post, we go through the best momentum indicators, how to use them, and the best custom momentum indicators for MT4 and MT5.
NOTE: Want a full list of some of the best free MT4 and MT5 indicators you can use in your trading? You can get them below.
Table of Contents
Best Forex Momentum Indicator
The basic idea of momentum indicators is that they can help you understand the speed that price is changing.
Most traders find the most success when using momentum indicators when they combine them with other popular indicators. This is because momentum indicators are not designed to show you the direction price is moving.
When using momentum indicators, you are looking at how strong a move in the price action has been or how strong it could potentially be. You can also use momentum indicators to spot potential areas where price could reverse.
The other way momentum indicators are used is in connection with other indicators or price action information. These include strategies such as trendlines or moving averages which can show you the trend.
Two of the best momentum indicators are;
#1: Relative Strength Index Indicator.
#2: Moving Average Convergence Divergence Indicator.
RSI Momentum Indicator
The RSI or relative strength index is one of the most popular technical indicators for looking at momentum.
When you add the RSI to your chart, you will be shown an oscillator.
This oscillator moves between 0 and 100 to show you overbought and oversold levels.
When the oscillator begins to move above 70, it is thought that the price is overbought.
On the other hand, when the price starts moving below 30, it is thought the price is oversold.
These levels can then help you identify potential market reversal points.
MACD Momentum Indicator
The MACD or moving average convergence divergence indicator is another indicator that is popular for spotting momentum.
The MACD looks at the difference between short and long-term price action information. The MACD is calculated with two moving averages, and The 26-period moving average is subtracted from the 12 period moving average to get the calculation.
The MACD will show you three main components; the MACD line, the signal line, and the histogram.
How to Use a Momentum Indicator in MT4 and MT5
If you want to use momentum indicators that are already built into your MT4 or MT5 charts, you need to do the following;
- Open your MT4 or MT5 charts.
- Click on ‘insert’ > ‘indicators’.
- You can then select the indicator you want. For example, if wanting to use the MACD, you would then select ‘oscillators’ and then ‘MACD’.
- The indicator will now be added to your chart, where you can adjust the settings how you need.
Squeeze Momentum Indicator MT4
Along with the more commonly built-in momentum indicators, you can also use other custom momentum indicators inside MT4 and MT5.
One of the best custom momentum indicators for MT4 is the squeeze momentum indicator.
This is a custom indicator that is based on the strategies discussed in the book ‘Mastering the Trade’ by John Carter.
This indicator combines multiple indicators to give you clear readings. These indicators include Bollinger Bands and Keltner channels.
This indicator can help you gauge the momentum levels or look for potential breakouts.
You can get the MT4 squeeze momentum indicator here.
Squeeze Momentum Indicator MT5
One of the best custom momentum indicators for MT5 is the modified TTM squeeze indicator.
This indicator tries to show you areas of potential consolidation and calmer periods.
Once you have found these consolidation levels, you can then look for trade entries to give you the potential for larger moves.
This is a modified version of the squeeze indicator, and it was designed to give you faster and better entry points.
You also have the option to either use the modified or standard squeeze strategy.
Another convenient feature of this indicator is that it gives you price action information. These alerts can be simple sound alerts from your charts or through email and your phone.
You can get the MT5 squeeze momentum indicator here.
Note: Don’t know how to install and use these indicators? Read How to Download, Install and Use MT4 and MT5 Indicators.