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ΔMP & Σ(ΔMP) Technical Indicators

ΔMP & Σ(ΔMP) -Τhe Latest Technical Indicator by TradingCenter

TradingCenter is always striving to provide the trading community with innovative technical analysis tools and techniques. The aim is to help traders better analyze the financial markets and accurately understand the cyclicality of certain asset classes. ΔMP is the latest technical analysis tool by TradingCenter. ΔMP is an indicator that can be used on any financial asset and almost on any chart timeframe.

Introducing ΔMP -Measuring Momentum using Historical Intraday Ranges

In my latest eBook, I introduced ΔMP. The mission of ΔMP is to measure and illustrate the historical momentum of any Forex pair, or any other financial-traded asset. The book is found here:

► The Hidden Patterns Behind 15 Forex Pairs: Revealing Momentum and Seasonal Patterns Based on 18.5 Years of Daily Exchange Rates

Forming ΔMP:

ΔMP is formed by summarizing the historical divergence between closing rates and intraday ranges.

Calculation

This is how ΔMP works:

ΔMP reflects the daily difference between the Closing Price and the Mean Price

□ Where:

Mean Price = (Daily High + Daily Low) / 2

ΔMP = {(Closing Price – Mean Price) / Mean Price} %

The Importance of ΔMP

ΔMP expresses the divergence between the closing price and the mean price. Positive ΔMP values in a row indicate that the price of an asset continuously closes near the highest intraday price. That is a sign of a positive momentum regarding the dynamics of intraday demand/supply. In general, when ΔMP shows highly positive values for a certain period, the odds of winning for that period are better.

Let's take for example GBPUSD.

In the following GBPUSD chart, there are two variables:

(i) The blue-line represents the average monthly returns of GBPUSD for the period 2000-2018

(ii) The orange area represents the average monthly ΔMP for the exact same period

Chart: Average Returns & Average ΔMP on GBPUSD (period 2000-2018)

Observations:

(1) The average returns and ΔMP move almost always in the same direction

(2) The chart uncovers a very intense seasonality for GBPUSD as concerns February and April

Unique Charting using Σ(ΔMP)

ΔMP is also used for drawing momentum charts, by summarizing historical ΔMP values and forming Σ(ΔMP) as follows:

□ Σ(ΔMP) for N Periods

ΔMP(N) = {(Closing-1 – Mean-1)/Mean-1)%} + {(Closing-2 – Mean-2)/Mean-2)%}… + {(Closing-N – Mean-N)/Mean-N)%}

Σ(ΔMP) Charting -Example on EURUSD and USDJPY

The following chart areas include Σ(ΔMP) on two popular Forex pairs, EURUSD and USDJPY.

Example-1: EURUSD

Starting with an EURUSD weekly chart for the period 1995-2018, and a Σ(ΔMP) chart for the period 2000-2018.

Chart-Area-1: EURUSD Weekly 1995-2018 plus Σ(ΔMP) 2000-2018

Observations:

(1) Amazingly, the Σ(ΔMP) chart is almost identical to the weekly EURUSD chart for the same period. This fact emphasizes the importance of assessing the periodic momentum and the decisive role of the periodic momentum to any strong price movement.

(2) If you look closer at the above Σ(ΔMP) chart, you are going to observe the formation of a general support level (AB line) which afterward transforms into a resistance level.

Example-2: USDJPY

The following chart area incorporates a USDJPY weekly chart for the period 1996 to 2018 and a Σ(ΔMP) chart for a shorter period (2000 to 2018).

Chart-Area-2: USDJPY Weekly (W1) & Σ(ΔMP)

Observations regarding Σ(ΔMP):

(1) The above Σ(ΔMP) chart includes a Linear Trendline (R²=0.8893), the higher the R-squared, the better the model fits the data

(2) The linear trendline seems to work as a support/resistance trendline, which is definitely out of the ordinary

(3) After 2004, the Σ(ΔMP) chart shows a strong bullish formation for USDJPY, and maybe that can be contributed to the differential of growth rates between US and Japan, but also to the differential of interest rates between the two economies

MORE ABOUT ΔMP & Σ(ΔMP)

-Trading signals including the ΔMP and Σ(ΔMP) will come in TradingCenter.org

-My latest ebook including the full scale of ΔMP (and over 100 charts) is found here at Amazon:

► MY BOOK AT AMAZON INCLUDING FULL ΔMP EXAMPLES & KEY FOREX TRADING STATISTICS

■ ΔMP & Σ(ΔMP) -Τhe Latest Technical Indicator by TradingCenter

Giorgos Protonotarios, Financial Analyst, for TradingCenter.org (2018)