Dynamic Momentum Index

DEFINITION of 'Dynamic Momentum Index'

An indicator used in technical analysis that determines overbought and oversold conditions of a particular asset. This indicator is very similar to the relative strength index (RSI). The main difference between the two is that the RSI uses a fixed number of time periods (usually 14), while the dynamic momentum index uses different time periods as volatility changes.

BREAKING DOWN 'Dynamic Momentum Index'

This indicator is interpreted in the same manner as the RSI where readings below 30 are deemed to be oversold and levels over 70 are deemed to be overbought. The number of time periods used in the dynamic momentum index decreases as volatility in the underlying asset increases, making this indicator more responsive to changing prices than the RSI.

RELATED TERMS
  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Oversold

    1. A condition in which the price of an underlying asset has ...
  3. Overbought

    1. A situation in which the demand for a certain asset unjustifiably ...
  4. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  5. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator ...
  6. Return on Market Value of Equity ...

    Return on market value of equity (ROME) is a comparative measure ...
Related Articles
  1. Trading Strategies

    Momentum And The Relative Strength Index

    These two indicators can give the trader a better understanding of when to get in and out of an issue.
  2. Active Trading

    An Introduction To The Relative Strength Index

    Learn the difference between relative strength and the relative strength index, a frequently used technical analysis oscillator.
  3. Active Trading

    Relative Strength Index And Its Failure-Swing Points

    Confirm your buy and sell signals with this oscillator categorized as an overbought/oversold index.
  4. Chart Advisor

    Sector Headwinds Buffeting First Solar (FSLR, TAN)

    First Solar has entered a new downtrend after failing to break out above two-year resistance.
  5. Chart Advisor

    Better Buy: Home Depot or Lowe's? (HD, LOW)

    Home Depot and Lowe’s have risen to resistance levels that could yield fresh trend advances.
  6. Chart Advisor

    3 Short Sales in the Apple Ecosystem (AAPL, SWKS)

    Deteriorating sentiment should offer profitable short sales on the key Apple suppliers.
  7. Chart Advisor

    Amazon Levels to Watch After Earnings (AMZN)

    An Amazon rally above 650 after earnings should open the door to a test of the bull market high.
  8. Chart Advisor

    Nasdaq-100 Weakness Waving Red Flags (QQQ, SPY)

    The Nasdaq-100 is lagging blue chip and small cap indices, signaling a bearish divergence that could end the recovery wave.
  9. Fundamental Analysis

    Alcoa vs. BHP Billiton: Which Is Better for My Portfolio?

    Obtain an up-to-date overview of BHP Billiton and Alcoa, Inc., two key players for investors seeking exposure to the aluminum market to consider.
  10. Chart Advisor

    Wait for a Pullback to Buy Pan American Silver (PAAS, SLV)

    Pan American Silver is trading just two points from resistance, warning sidelined players to wait for a substantial pullback.
RELATED FAQS
  1. How do I use the Dynamic Momentum Index for creating a forex trading strategy?

    Create a forex trading strategy designed to take advantage of the ability of the dynamic momentum index to give early signals ... Read Answer >>
  2. What is the Dynamic Momentum Index formula and how is it calculated?

    See how Tushar Chande and Stanley Kroll changed the basic formula for the relative strength index (RSI) to create the dynamic ... Read Answer >>
  3. What are the best technical indicators to complement the Dynamic Momentum Index?

    Use other technical indicators to complement the use of the dynamic momentum index in analyzing a market and determining ... Read Answer >>
  4. What is a common strategy traders implement when using the Dynamic Momentum Index?

    Learn how to implement a common trading strategy using the dynamic momentum index that traders utilize when price is near ... Read Answer >>
  5. Why is the Dynamic Momentum Index important for traders and analysts?

    Obtain early indications of overbought or oversold conditions in a market by learning the significance of the dynamic momentum ... Read Answer >>
  6. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center