Indicators

Momentum

Complete guide to all momentum indicators available in MagiaTrade

Momentum Indicators

Momentum indicators measure the speed and strength of price movements, helping identify overbought/oversold conditions and potential reversal points. These oscillators are essential for timing entries and exits.

Available Momentum Indicators

Relative Strength Index (RSI)

The RSI is a momentum oscillator that measures the speed and magnitude of price changes to identify overbought and oversold conditions.

Overview

Developed by J. Welles Wilder Jr., the RSI oscillates between 0 and 100, providing insights into whether an asset is potentially overbought or oversold. It's one of the most popular momentum indicators used by traders worldwide.

How It Works

RSI calculates the ratio of upward price movements to downward price movements over a specified period, typically 14 periods. The result is normalized to fit within a 0-100 range.

Configuration

indicator: RSI
period: 14        # Calculation period
overbought: 70    # Upper threshold
oversold: 30      # Lower threshold

Parameters

Parameter	Default	Range	Description
`period`	14	2-100	Number of periods for calculation
`overbought`	70	60-90	Overbought threshold level
`oversold`	30	10-40	Oversold threshold level

Interpretation

Basic Levels

RSI > 70: Overbought condition (potential reversal down)
RSI < 30: Oversold condition (potential reversal up)
RSI = 50: Neutral momentum
RSI > 50: Bullish momentum
RSI < 50: Bearish momentum

Advanced Interpretation

80/20 Levels: More extreme overbought/oversold for strong trends
Failure Swings: RSI fails to exceed previous high/low
Center Line Crossover: Crossing 50 indicates momentum shift

Trading Signals

Overbought/Oversold

Oversold Buy: RSI < 30 and turning up
Overbought Sell: RSI > 70 and turning down

Divergence

Bullish Divergence: Price makes lower low, RSI makes higher low
Bearish Divergence: Price makes higher high, RSI makes lower high

Trend Confirmation

Uptrend: RSI stays between 40-90
Downtrend: RSI stays between 10-60

Best Practices

Important: RSI can remain overbought/oversold for extended periods in strong trends. Always use with other indicators for confirmation.

Period Adjustment

Shorter Period (5-10): More sensitive, more signals
Standard Period (14): Balanced approach
Longer Period (20-30): Smoother, fewer false signals

Market Conditions

Trending Markets: Adjust levels (40-80 for uptrends)
Ranging Markets: Standard 30-70 levels work well
Volatile Markets: Consider wider thresholds

Example Strategies

RSI Reversal

strategy: RSI_Reversal
indicators:
  - RSI:
      period: 14
      oversold: 30
      overbought: 70
rules:
  - Buy when RSI < 30 and crosses above 30
  - Sell when RSI > 70 and crosses below 70

RSI Divergence

strategy: RSI_Divergence
indicators:
  - RSI:
      period: 14
conditions:
  - Bullish: Price lower low + RSI higher low
  - Bearish: Price higher high + RSI lower high

Advantages

Easy to understand and interpret
Works in various market conditions
Good for identifying reversals
Can spot divergences early

Limitations

Can give false signals in strong trends
Lagging indicator
Less effective in trending markets
Requires confirmation from other indicators

Combining with Other Indicators

Effective combinations:

Moving Averages: Trend direction confirmation
MACD: Momentum confirmation
Bollinger Bands: Volatility context
Volume: Validate signals

RSI Variations

Stochastic RSI

Applies stochastic formula to RSI values for more sensitivity.

Connors RSI

Combines three components: Price RSI, Streak RSI, and Magnitude.

Dynamic RSI

Adjusts period based on market volatility.

AI Agent Configuration

agent_config:
  indicators:
    - RSI:
        period: 14
        overbought: 70
        oversold: 30
  prompt: |
    Monitor RSI for reversal opportunities:
    - Buy signal when RSI < 30 in uptrend (MA > 0)
    - Look for bullish divergence patterns
    - Confirm with volume increase
    - Risk management: Stop at recent low

Common Mistakes to Avoid

Trading solely on overbought/oversold levels
Ignoring the overall trend
Not waiting for confirmation
Using same settings for all assets
Overlooking divergences

Stochastic RSI
Connors RSI
MACD

Further Reading

Stochastic Oscillator

Compares the closing price to the price range over a specified period to identify overbought and oversold conditions.

Configuration

indicator: Stochastic
k_period: 14        # %K calculation period
d_period: 3         # %D smoothing period
smooth: 3           # Additional smoothing

Parameters

Parameter	Default	Range	Description
`k_period`	14	5-50	%K calculation period
`d_period`	3	1-10	%D smoothing period
`smooth`	3	1-10	Additional smoothing

Interpretation

> 80: Overbought condition
< 20: Oversold condition
%K crosses above %D: Buy signal
%K crosses below %D: Sell signal

Trading Signals

Buy: %K crosses above %D in oversold area
Sell: %K crosses below %D in overbought area

RSI
Williams %R

CCI (Commodity Channel Index)

Measures how far the current price deviates from its statistical mean to identify overbought and oversold conditions.

Configuration

indicator: CCI
period: 20          # Calculation period

Parameters

Parameter	Default	Range	Description
`period`	20	10-50	Number of periods

Interpretation

CCI > 100: Overbought
CCI < -100: Oversold
Cross above zero: Bullish
Cross below zero: Bearish

Trading Signals

Buy: CCI crosses above -100 (exit oversold)
Sell: CCI crosses below 100 (exit overbought)

RSI
Stochastic

Williams %R

Shows where the current price sits within the recent trading range, similar to Stochastic but inverted.

Configuration

indicator: Williams_R
period: 14          # Lookback period

Parameters

Parameter	Default	Range	Description
`period`	14	5-50	Number of periods

Interpretation

> -20: Overbought
< -80: Oversold
Move above -50: Bullish
Move below -50: Bearish

Trading Signals

Buy: Williams %R rises above -80
Sell: Williams %R falls below -20

Stochastic
RSI

Awesome Oscillator

Shows the difference between 34-period and 5-period simple moving averages of midpoint prices.

Configuration

indicator: Awesome_Oscillator
short_period: 5     # Short SMA period
long_period: 34     # Long SMA period

Parameters

Parameter	Default	Range	Description
`short_period`	5	3-10	Short SMA period
`long_period`	34	20-50	Long SMA period

Interpretation

Above zero: Bullish momentum
Below zero: Bearish momentum
Color change: Momentum shift
Zero line cross: Trend change

Trading Signals

Buy: AO crosses above zero line
Sell: AO crosses below zero line

MACD
Momentum

CMO (Chande Momentum Oscillator)

Measures momentum using the sum of gains and losses over a specified period.

Configuration

indicator: CMO
period: 14          # Calculation period

Interpretation

CMO > 50: Overbought
CMO < -50: Oversold
Zero line cross: Momentum change

Trading Signals

Buy: CMO crosses above -50
Sell: CMO crosses below 50

RSI
Momentum

Connors RSI

Composite oscillator that combines RSI, price streak, and percentile rank for mean reversion signals.

Configuration

indicator: Connors_RSI
rsi_period: 3
streak_period: 2
rank_period: 100

Interpretation

> 90: Extremely overbought
< 10: Extremely oversold

RSI

Coppock Curve

Long-term momentum indicator designed to identify major trend changes, typically used on monthly timeframes.

Configuration

indicator: Coppock_Curve
wma_period: 10
roc_long: 14
roc_short: 11

Interpretation

Turn from negative to positive: Buy signal
Long-term trend changes: Primary use case

ROC

DPO (Detrended Price Oscillator)

Removes the trend component from price to focus on short-term cyclical patterns.

Configuration

indicator: DPO
period: 20

Interpretation

Above zero: Price above trend
Below zero: Price below trend
Cyclical patterns: Main focus

Moving Average

Fisher Transform

Converts price data into a Gaussian normal distribution to provide clearer buy and sell signals.

Configuration

indicator: Fisher_Transform
period: 10

Interpretation

Values above +2: Overbought
Values below -2: Oversold
Zero line crosses: Trend changes

RSI

KST (Know Sure Thing)

Summed rate of change indicator that combines multiple ROC periods for momentum analysis.

Configuration

indicator: KST
roc1: 10
roc2: 15
roc3: 20
roc4: 30

Interpretation

Above zero: Bullish momentum
Below zero: Bearish momentum
Signal line crossovers: Entry/exit points

ROC

Momentum

Simple momentum oscillator that measures the rate of change in price over a specified period.

Configuration

indicator: Momentum
period: 10

Interpretation

Above 100: Upward momentum
Below 100: Downward momentum
Divergence: Potential reversal

ROC

Price Oscillator

Shows the difference between two moving averages expressed as a percentage.

Configuration

indicator: Price_Oscillator
fast_period: 12
slow_period: 26
ma_type: EMA

Interpretation

Above zero: Bullish
Below zero: Bearish
Zero line cross: Trend change

MACD

ROC (Rate of Change)

Measures the percentage change in price over a specified number of periods.

Configuration

indicator: ROC
period: 12

Interpretation

Above zero: Bullish momentum
Below zero: Bearish momentum
Extreme values: Reversal potential

Momentum

RVI (Relative Vigor Index)

Compares the closing price to the trading range, similar to Stochastic but with different calculation.

Configuration

indicator: RVI
period: 10
signal_period: 4

Interpretation

RVI above signal: Bullish
RVI below signal: Bearish
Centered oscillator: Around zero line

Stochastic

SMI Ergodic Indicator

Double smoothed momentum oscillator that provides smooth signals with reduced noise.

Configuration

indicator: SMI_Ergodic
period: 20
smooth1: 5
smooth2: 5

Interpretation

Above signal line: Bullish
Below signal line: Bearish
Zero line crosses: Trend change

TSI

Stochastic RSI

Applies the Stochastic oscillator formula to RSI values for more sensitive signals.

Configuration

indicator: Stochastic_RSI
rsi_period: 14
stoch_period: 14
k_smooth: 3
d_smooth: 3

Interpretation

> 80: Overbought
< 20: Oversold
More sensitive: Than regular Stochastic

RSI
Stochastic

TRIX

Triple smoothed exponential moving average rate of change indicator for long-term trend identification.

Configuration

indicator: TRIX
period: 14

Interpretation

Above zero: Bullish trend
Below zero: Bearish trend
Signal line crossovers: Entry/exit points

MACD

TSI (True Strength Index)

Double smoothed momentum oscillator that provides clear trend and momentum signals.

Configuration

indicator: TSI
long_period: 25
short_period: 13

Interpretation

Above zero: Bullish momentum
Below zero: Bearish momentum
Signal line crossovers: Trading signals

MACD

Ultimate Oscillator

Combines three different time periods to reduce false signals and provide more reliable overbought/oversold readings.

Configuration

indicator: Ultimate_Oscillator
period1: 7
period2: 14
period3: 28

Interpretation

> 70: Overbought
< 30: Oversold
Divergence signals: Important for reversals

RSI

Vortex Indicator

Measures the relationship between closing prices and true range to identify trend changes.

Configuration

indicator: Vortex
period: 14

Interpretation

VI+ above VI-: Bullish trend
VI- above VI+: Bearish trend
Crossovers: Trend changes

ADX

Williams Alligator

Uses three smoothed moving averages with different periods to identify trend phases and momentum.

Configuration

indicator: Williams_Alligator
jaw_period: 13
teeth_period: 8
lips_period: 5

Interpretation

Lines converging: Market sleeping
Lines diverging: Trend forming
Price above all lines: Strong bullish

Moving Average

Aroon

Measures the time elapsed since the highest high and lowest low to identify trend strength and potential reversals.

Configuration

indicator: Aroon
period: 14

Interpretation

Aroon Up > 70: Strong uptrend
Aroon Down > 70: Strong downtrend
Both < 50: Consolidation

ADX

Chop Zone

Identifies choppy, sideways market conditions to help traders avoid difficult trading environments.

Configuration

indicator: Chop_Zone
period: 14

Interpretation

Values near 50: Choppy market
Values > 70: Trending market
Values < 30: Trending market

Choppiness Index

Choppiness Index

Determines whether the market is in a choppy, sideways state or a trending state.

Configuration

indicator: Choppiness_Index
period: 14

Interpretation

> 61.8: Choppy market
< 38.2: Trending market
Middle range: Transitional

ADX

Trend Strength Index

Measures the strength of the current trend to help filter trading signals and identify high-probability setups.

Configuration

indicator: Trend_Strength_Index
period: 25

Interpretation

Higher values: Stronger trend
Lower values: Weaker trend
Helps filter: Trading signals

ADX

Trend

Complete guide to all trend indicators available in MagiaTrade

Volatility

Complete guide to all volatility indicators available in MagiaTrade