Excessive Momentum Indicator is the first indicator to measure the excessive momentum in the financial market. Excessive Momentum Indicator was originally developed by Young Ho Seo. This indicator demonstrates the concept of Equilibrium Fractal Wave and the practical application. Excessive Momentum can tell you about the psychology of crowd. It will reveal potential future market direction. Therefore, you can base your trading decision with the excessive momentums. This indicator will spot when the excessive momentum happens in your chart. It is possible to combine excessive momentum with breakout trading, harmonic pattern, volume spread analysis and etc.
A. Indicator settings
Bars To Scan: amount of candle bars to calculate the indicator
Timeframe for Calculation: timeframe choice for indicator calculation
Momentum Strength Factor: Momentum Strength is the strength of Excessive Momentum to detect (higher momentum strength factor means larger excessive momentum strength and therefore, you will get fewer patterns to trade)
Detrend Period: detrending period for the Trend filtered ZigZag indicator
ZigZag Depth: depth for the Trend filtered ZigZag indicator
B. Graphic settings
Use White Chart: to use white chart, set to true, otherwise, just set to false
ZigZagColor: color for the Trend filtered ZigZag indicator
ZigZagWidth: width for the Trend filtered ZigZag indicator (set to 0 to hide ZigZag lines from your chart)
Excessive Momentum Right Extension in Bar: Right extension in bars for EM Level
Excessive Momentum High Color: Excessive Momentum line color for C’ > C
Excessive Momentum High Width: Excessive Momentum line width for C’ > C
Excessive Momentum Low Color: Excessive Momentum line color for C’ < C
Excessive Momentum Low Width: Excessive Momentum line width for C’ < C
Fill Momentum Triangle: Fill the triangles
How to use
I have denoted the level where excessive momentum starts as the point C. The level of excessive momentum is denoted as point C’. C-C’ is where the ZigZag and the price start to get spread apart. The detection of excessive momentum will provide you the key clue for your trading direction. With excessive momentum indicator, you can detect four phases in time order:
Phase 1: Potential Turning Point arrival with C-C’ identification. (This is detected when the ZigZag and actual price start to spread apart.)
Phase 2: Turning Point confirm with C-C’ Confirmation
Phase 3: D Level detection
Phase 4: D level confirmation
Phase 1 will provide you the potential turning point opportunity. Phase 2 and phase 3 will arrive almost simultaneously. Then Phase 4 will comes. After the phase 4, the price can make the potential breakout at either C level or D level. In simple words, you can aim to predict the turning point at phase 1. Then you will be watching out the D level and C level for the ultimate breakout for your trading after phase 4. Whether you take the position at phase 1 is optional and it will depend on your skills for predicting turning points.
Simple Breakout Trading
At the simplest trading setup, you can just use the two price levels at point C and point D in your breakout trading. This is easy and simple.
With Harmonic Pattern
When you use Excessive Momentum with Harmonic Pattern, you will expect D point of Harmonic Pattern to appear at the extreme range of Excessive momentum. Especially when D point of Harmonic pattern appears below C of Excessive momentum, bullish turning point can be identified with more certainty. Likewise, when D point of Harmonic pattern appears above C of Excessive momentum, bearish turning point can be identified with more certainty.
With Volume Spread Analysis
Excessive Momentum indicator is probably the best tool for volume spread analysis. For practical trading, we focus on identifying accumulation (=demand zone) and distribution area (=supply zone). C point of Excessive Momentum become the selling climax (SC) or the buying climax (BC). Then you will use demand and supply patterns to confirm the accumulation area and distribution area for your trading. Both short term and long term trading is possible.
Please use one of these two Indicators for accumulation and distribution area identification.