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.

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RELATED FAQS
  1. How do I use the Dynamic Momentum Index for creating a forex trading strategy?

    A forex trading strategy using the dynamic momentum index can be designed to trade off of daily pivot points or other major ... Read Full Answer >>
  2. What is the Dynamic Momentum Index formula and how is it calculated?

    The dynamic momentum index was created by Tushar Chande and Stanley Kroll. It very similar to the relative strength index ... Read Full Answer >>
  3. What are the best technical indicators to complement the Dynamic Momentum Index?

    The best technical indicators to complement the dynamic momentum index are support and resistance levels, trendlines, and ... Read Full Answer >>
  4. What is a common strategy traders implement when using the Dynamic Momentum Index?

    Traders use the dynamic momentum index to determine trade entries in relation to daily pivot points. The dynamic momentum ... Read Full Answer >>
  5. Why is the Dynamic Momentum Index important for traders and analysts?

    The dynamic momentum index is important for traders and market analysts, because it is a more sensitive momentum indicator ... Read Full 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 Full Answer >>
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