M = PC - PL
Where "M" is momentum, "PC" is current price, and "PL" is the first price in a given time period. Momentum is usually charted around a zero line. When momentum is above the zero line, then the asset's overall trend is upward and when momentum is below the zero line then the assets overall trend is downward. Take a look at the example below. Note FreestockCharts.com uses '100' as the zero line.
The most important part of the momentum chart is where it crosses the 100 line. If momentum crosses up over the 100 line, then that's a good indication that price is on the rise and the opposite if price moves below the 100 line. Momentum works well with any time chart; just remember that the signal is usually only good for the next couple of candles so for example when using it with the 1 min chart, make a trade that's 5 mins or less (the best is generally 2 mins). The best time to enter a trade is when momentum crosses the 100 line on the close of the previous candlestick.
There are a few things to keep in mind when using momentum as a indicator in binary options.
1. Don't forget price action. If looking are the chart it seems like a bad time to enter the trade, then DON'T enter. It will give false signals.
2. Watch out for relatively large candlesticks/relatively calm periods. During times with very little movement, the momentum indicator is basically useless for when to enter a trade in binary options as the momentum indicator will be constantly be moving above and below the zero line. Also if there's a candle that's much larger than the ones before it then the indicator is more likely to be off.
3. It will at times lag behind price. While it is a useful leading indicator, curtain setups will cause the momentum indicator to lag behind price. If it seems off, try it on a different asset.
Momentum is one one of the most useful indicators when trading binary options when used correctly.
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