Dynamic Momentum Index

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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.

INVESTOPEDIA EXPLAINS '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.

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RELATED FAQS
  1. 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 ...
  2. 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 ...
  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 ...
  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 ...
  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 ...
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