How to Use the Price Momentum Oscillator – PMO on IQ Option.

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  • What is the Price Momentum Oscillator – PMO on IQ Option?
  • The Principle behind the Price Momentum Oscillator.
  • How to Set Up the Price Momentum Oscillator on IQ Option.
  • Using the Price Momentum Oscillator to Trade Options on IQ Option.

What is the Price Momentum Oscillator (PMO)?

The Price Momentum Oscillator is an oscillator that measures the amount by which an asset’s price has changed over a given time.

It compares the current price of an asset with the previous price from a selected number of periods ago.

This price momentum oscillator is like the Rate of Change (ROC) indicator but its calculation is smoothed twice with moving averages.

Because the PMO is normalized, it can be used to show the relative strength of the price trend.

Price Momentum Oscillator on IQ Option

Who Developed the PMO Indicator?

This oscillator was developed by Carl Swenlin.

It consists of two lines – the PMO line and the Signal line.

On IQ option charts, it appears as two continuous lines (Green and Red), oscillating above and below a zero axis.

When applied, it forms below the IQ Option price charts.

The Principle Behind the Price Momentum Oscillator.

The Price Momentum Oscillator consists of two moving lines – the PMO line and the signal line.

In IQ Option default settings, the PMO line is Red while the Signal line is Green in color.

The Price Momentum Oscillator oscillates about a zero line.

Usually, the direction of the indicator shows if the trend strength is increasing or decreasing.

Also, the steepness of the trend angle shows the power with which the trend occurs.

Understanding the PMO Indicator on IQ Option.

The PMO is based on exponential moving averages and it is built to lag.

The higher the smoothing, the greater the lag.

Lagging means that the price will turn first before the PMO reacts.

However, earlier signals can be detected using the PMO line and the Signal line crossovers.

A simple way of calculating the Price Momentum Index is by;

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  • Taking the current price and dividing it by what was the price given periods ago.
  • Then multiply the number you get by 100.

Values that are more than 100 indicate positive momentum, thus an increasing price.

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Values that are less than 100 indicate a negative momentum which points to a decreasing price.

That is the principle behind the Price Momentum Oscillator.

How to ADD the Price Momentum Oscillator on IQ Option.

Set Up the Price Momentum Oscillator on IQ Option in the following steps.

  • Log in to your IQ Option trading account.
  • Locate the Tools Tab at the bottom of the interface – Scissors like.
  • Hit the Tools Tab.
  • Select Indicators from the Options that pop up. A list of Indicators will appear.
  • Select Price Momentum Oscillator from the list. Under momentum.
  • A pop up will appear for you to modify the periods, colors, and widths of various lines and the PMO smoothing periods.
  • Hit the Apply button once you adjust those parameters.
  • Two lines (Green and Red), oscillating about a zero axis will appear at the bottom part of the interface below the chart.

The Price Momentum Oscillator is ready for use!!!

PMO Indicator on Kenya Forex Expo

Using the Price Momentum Oscillator to Trade Options on IQ Option.

We already mentioned that the Price Momentum Oscillator is used to measure the amount by which an asset’s price has changed over time.

How does this affect how we trade on IQ Option? How can we use this indicator to trade profitably on IQ Option?

That is exactly what we are about to find out! Pay keen attention!!

Recap:

  • The Price Momentum Oscillator consists of a Red PMO line and a Green Signal line.
  • Price Momentum Oscillator lines oscillate about zero lines.
  • The higher or lower the Price Momentum Oscillator lines go from the zero lines, the stronger the decreasing or the increasing trend.
  • The steepness of the Price Momentum trend angle shows the power behind the trend move.

Having understood all that, let us now mention the various signals the Price Momentum Oscillator gives;

  • Zero line crossovers.
  • PMO line-Signal line crossovers.
  • Overbought and oversold conditions.

Before using the PMO or its signals, you will need to identify if the market is trending or it is about to trend.

After that, you can use whatever signal is shown to join and to profit from the trend.

How to Trade Using IQ Option’s PMO Signals.

  1. Zero line crossovers signals

If the PMO lines cross the zero line from below upwards, then that is a bullish signal. Entering a Buy position would be in order.

If the Price Momentum Oscillator lines cross the zero line from above downwards, then that is a bearish signal. Consider entering a Sell position.

Crossovers on PMO

 

  1. PMO line-Signal line crossovers.

If the PMO line (Red) crosses over its Signal line (Green) from below upwards, then that is a bullish signal. Consider entering a Buy position.

If the PMO line (Red) crosses over its Signal line (Green) from above downwards, then that is a bearish signal. Prepare to Sell.

BUY SELL PMO

  1. Overbought and oversold conditions.

The PMO has no limits on its scale. This makes it difficult to determine overbought and oversold levels.

However, where you know the specific PMO range of the asset you are trading, you can use the PMO to identify such levels.

You will need to prepare to sell when the PMO hits the Overbought level and to Buy when the PMO hits the Oversold level.

  1. Divergences.

Divergences occur where the price movement on the chart is not confirmed by the PMO movement.

These always hint towards a trend reversal.

For example, if the price on the chart is rising, the PMO reading may not rise as much.

This shows that the rising trend is about to reverse to a downtrend.

Remember Divergences may be tricky to trade for newbies!!

Conclusion.

I have always said that a technical analysis tool is never to be used solely.

Price Momentum Oscillator is no exception.

Include it in your IQ Option trading strategy today and enjoy the profits!!

Happy Trading!!

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