One-Minute Momentum

I find it very useful to create a separate one-minute momentum indicator

of each chart that I am watching in real time. A one-minute

momentum indicator chart will tend to smooth out the volatility

and errors in tick data. Traders who trade using tick charts need to understand that tick data can be late and incorrect. The analogy I

give my students is "If you trade too close to the fire you are going

to get burned." By using the one-minute momentum indicator chart,

you will gain a better picture of the short-term microtrend close to

the stick (price bar) without suffering third-degree burns.

In Figure 6.7, you will see a one-minute momentum indicator of

Intel showing price on the top and the indicator on the bottom.

Notice how Intel's short-term momentum is gaining strength with

higher highs in the indicator. Also note that Intel does not stay

below the zero line for any extended period of time. At 11:15 A.M. the

Nasdaq begins a downturn. Prior to this, the one-minute momentum

begins to turn down from what was the third highest point of shortterm

momentum of the day. With this and other information, a decision

is made to sell Intel. Here is the information that led to the sell

decision:

1. The Nasdaq market is beginning a downturn.

2. Intel has been in a bullish intraday trend for over 20 minutes.

3. Intel is now parabolic on both the 5- and 15-minute charts.

4. The five-minute chart is showing lower highs and lower

lows.

5. The one-minute indicator shows momentum turning down

from its highest point at that time.

Figure 6.8 shows the steady increase in price momentum until

just prior to 10:00 A.M. At this time, the one-minute momentum

indicator began a sharp decline. The 5- and 15-minute charts confirmed

a parabolic price run and showed signs of slowing momentum

that could lead to a reversal. In the case of Intel and Motorola,

the one-minute momentum indicator of price aided in the buy and

sell decisions.

I find it very useful to create a separate one-minute momentum indicator

of each chart that I am watching in real time. A one-minute

momentum indicator chart will tend to smooth out the volatility

and errors in tick data. Traders who trade using tick charts need to understand that tick data can be late and incorrect. The analogy I

give my students is "If you trade too close to the fire you are going

to get burned." By using the one-minute momentum indicator chart,

you will gain a better picture of the short-term microtrend close to

the stick (price bar) without suffering third-degree burns.

In Figure 6.7, you will see a one-minute momentum indicator of

Intel showing price on the top and the indicator on the bottom.

Notice how Intel's short-term momentum is gaining strength with

higher highs in the indicator. Also note that Intel does not stay

below the zero line for any extended period of time. At 11:15 A.M. the

Nasdaq begins a downturn. Prior to this, the one-minute momentum

begins to turn down from what was the third highest point of shortterm

momentum of the day. With this and other information, a decision

is made to sell Intel. Here is the information that led to the sell

decision:

1. The Nasdaq market is beginning a downturn.

2. Intel has been in a bullish intraday trend for over 20 minutes.

3. Intel is now parabolic on both the 5- and 15-minute charts.

4. The five-minute chart is showing lower highs and lower

lows.

5. The one-minute indicator shows momentum turning down

from its highest point at that time.

Figure 6.8 shows the steady increase in price momentum until

just prior to 10:00 A.M. At this time, the one-minute momentum

indicator began a sharp decline. The 5- and 15-minute charts confirmed

a parabolic price run and showed signs of slowing momentum

that could lead to a reversal. In the case of Intel and Motorola,

the one-minute momentum indicator of price aided in the buy and

sell decisions.