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7 Charting Tools for Spread Betting: A practical guide to making money from spread betting with technical analysis by Malcolm Pryor

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Tool 7 – Momentum

Background and construction

The Momentum indicator, and its close relative the Rate of Change indicator, are really a type of oscillator; nevertheless I have given them a separate chapter. The oscillators we looked at before were banded oscillators and can be used in the way described in that chapter.

If you recall, banded means having predefined minimum and maximum values, as for instance in the case of both RSI and the stochastic indicator where the minimum value for the indicators is zero and the maximum value 100. The Momentum and Rate of Change indicators are unbanded (i.e. they have no predefined minimum and maximum values) and lend themselves to one specialist technique in particular – divergence – which is the ...

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