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. 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 >>
  2. 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 >>
  3. 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 >>
  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. What are the best technical indicators that complement the Relative Strength Index ...

    Learn some of the best additional technical indicators that can be used along with the relative strength index to anticipate ... Read Answer >>
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    Read about some of the many uses of the Relative Strength Index (RSI), and learn about basic strategies traders implement ... Read Answer >>
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