Dynamic Momentum Index

AAA

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.

RELATED TERMS
  1. Indicator

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

    1. A situation in which the demand for a certain asset unjustifiably ...
  3. Oversold

    1. A condition in which the price of an underlying asset has ...
  4. Volatility

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

    A technical momentum indicator that compares the magnitude of ...
  6. Precedent Transaction Analysis

    A valuation method in which the prices paid for similar companies ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  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 Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
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

    Stocks Breaking to Downside - Time to Sell?

    These stocks have broken patterns or trendlines to downside, indicating more selling could be coming.
  5. Chart Advisor

    3 Ways To Trade The Bounce In Coal

    News from the Supreme Court has caused active traders to turn their attention to the coal markets. We'll take a look at how to trade the bounce.
  6. Chart Advisor

    How Investors are Profiting from Cyber Crime Fear

    An ETF that has seen significant gains this year in the growing field of cyber security, and the threat and fear of cyber attacks and cyber crime.
  7. Fundamental Analysis

    Are Fast-Casual Restaurants Overvalued?

    Can fast-casual restaurants actually grow to the levels that investors believe they can?
  8. Chart Advisor

    Buy These Stocks on The Pullback

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  9. Technical Indicators

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  10. Chart Advisor

    3 Ways To Trade Oil's Move Lower

    The spot price of oil is facing major resistance. We'll take a look at a few products that you can see to profit from the move.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!