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Inertia: The Forgotten Momentum Indicator!

Publish Date03/09/2012 08:17:10 PM

Last Update04/09/2012 02:36:08 PM

Inertia: The Forgotten Momentum Indicator!

 

From the physics realm, the term inertia has been taken, describing the mass and direction of motion. Inertia is one the most powerful momentum indicators, which has appeared in the (Stocks & Commodities) magazine in the September 1995 issue .

 

 

The name itself (Inertia) has been chosen by the Donald Dorsey who introduced the indicator. He declared that the trend is simply (outward result of inertia). Inertia is a RVI smoothed by a linear regression indicator and we will explain this sentence later in a separated article.

Now, dear reader let`s forget about the terminology of our indicator and move with me directly to the point, but first of all I want to ask you, do you trade momentum? If you do, join us and we will study together the performance of (Inertia) on the charts.

We know that the momentum of currency trading is based on its volatility and therefore inertia has a scale of measurements from (0) level to (100), while (50) is the middle level.

If the indicator reading is above 50, then it is a positive sign and when it is below 50, then the bearish sign is indicated.

Have a look at the image of the daily chart for EUR/USD pair below to judge yourself if it is useful to use inertia or not?

Click on the image for a larger view


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