Balanced Momentum

The Balanced Momentum indicator eliminates the dropout effect which is seen in the Standard Momentum indicator. Specifically, the dropout effect refers to a significant rise or fall, when the last bar in the lookback period “leaves” the calculation.

balanced momentum

Indicator Description

The Balanced Momentum indicator eliminates the dropout effect. This refers to a significant jump in momentum when the last bar in the lookback period “drops out”. The dropout effect will occur although there’s no significant change in the most recent price action. Basically, the standard calculation will show a significant change in momentum, when in fact, there was no or little price change at all.

You may eliminate the dropout effect with the Balanced Momentum calculation. The tail end of the N-bar lookback period is calculated with a triangular Moving Average: SMA(SMA(Input, n+1), n+1)[0]. This modification does not change the usability of the momentum indicator, it simply eliminates the distortion.

Also, you may apply the Balanced Momentum as input series for the Z-Score indicator. Our Indicator Spotlight on the Z-score discussed how to create a fixed scale for the Awesome Oscillator. Specifically, the post discussed how the Z-score can be used to create a fixed scale for non- normalized oscillators. This is particularly useful if you want to create testable entry and exit conditions for trading systems.

Other Library Indicators

The Indicator Library furthermore have categories for trend analysis, momentum oscillators, support / resistance and volume indicators. For trend analysis you may review the ADX, ADXVMA Plus, Heikin Ashi, MA Cross, or the Rainbow Filter. Library momentum oscillators include among others the Acceleration DecelerationLBR 3/10 Oscillator, Slow RSI or the TDI. The Indicator Spotlight newsletter reviewed the TDI indicator here. The Ichimoku Kinko Hyo, also featured in a Spotlight Newsletter, is also considered to be a momentum indicator. For volume analysis you may review Better Volume, Force Index or the Relative Volume indicator.

Support / resistance indicators are available from the Session Tools category including the Hourly Pivots, Pivots Daily, Pivots Weekly, Pivots Montly and the Pivots N-Monthly indicators. This category also contains Camarilla Daily Pivots, Camarilla Weekly Pivots, Camarilla Monthly Pivots and the Camarilla N-Monthly Pivots. Our blogs have further information on trading with Pivot Points and the use of rolling pivots for trend detection.

The Indicator Library also has a category with Fibonacci indicators, including the Prior Day Fibonacci LevelsCurrent Week Fibonacci Levels / Prior Week Fibonacci Levels, the Current Month Fibonacci Levels / Prior Month Fibonacci Levels and the Current N Month Fibonacci Levels / Prior N Month Fibonacci Levels. Our Indicator Spotlight also discussed Fibonacci Retracement Levels specifically. Additionally, this category also contains the Fibonacci Bands indicator.

The Balanced Momentum indicator is available for NinjaTrader 8 and its application was discussed in detail in a blog post on the Kaufmann Efficiency Ratio.

The indicator is available for NinjaTrader 8.