Ultimate Momentum Indicator is just like any other oscillator in Technical Analysis. It travels between the values -100 to +100, wherein a -100 value indicates maximum downward momentum and +100 the opposite. Trades are to be entered only when the momentum shifts from one direction to the other at the daily close and is calculated on the basis of the daily last traded / closing price . For example if the Nifty Future was showing a positive momentum for the past one or two weeks and at the close of today the Momentum Indicator is showing a minimum value of -50 a short trade can be initiated. Similarly if the immediate past momentum was downward and / or neutral and at the close of today the Momentum Indicator is showing a value of +50 or above a long trade can be initiated.
A Momentum Signal value of +50 to +100 shows upward momentum. Values between -49 to +49 show a pause or neutral momentum. A signal value of -50 to -100 show downward momentum. As the Signal has neutral values between -49 to +49, the trading system will not have positions in the market when neutral momentum is indicated. It is not an always in the market system.
For example, the Nifty Future closed at 5500.25 on 23rd March, 2011 and the Proprietary Momentum Indicator showed a 50 reading on that day. This meant the existence of maximum positive momentum. See below the snapshot of the spreadsheet showing the buy signal.
The Ultimate Momentum Indicator Spreadsheet
The Indicator in the spreadsheet shown above is Ultimate Momentum Indicator values of the Nifty Futures as on the closing of trade for the indicated dates and are calculated on the basis of the last traded prices or the closing prices.
The Nifty futures increased 456 points within the next eight trading days to hit a high of 5915 points on 1st April 2011. A chart of the Nifty futures showing the position as on 1st Apr 2011 is given below.
Well this is just one selected example of momentum shift which happened recently. Not all trades are profitable like this. Some trades may scrape to earn the costs. Some may lead to losses. That's why the Risk Management is of paramount importance. The rules for trade management and risk management are available on other pages.
The performance tab shows one year history of the The Ultimate Momentum Indicator, you can see for yourselves that the Indicator has promptly indicated all major trends and has withstood the different market conditions remarkably.
Please read the page named Entries and Exits for more information.
Cheers and Prosperous Trading!
