Forex Inertia Indicator Expert Advisor Setup - Setting Up Inertia Indicator Expert Advisor

Forex Inertia Indicator Expert Advisor Setup - Setting Up Inertia Indicator Expert Advisor - A Forex trader can come up with an Inertia Indicator Expert Advisor based on the Inertia indicator explained below.

Forex Inertia Indicator Expert Advisor rules can be combined with other Forex trading indicators to come up with other EA Forex Robots that trade using rules based on two or more indicators combined to form a forex trading system.

Inertia Technical Analysis and Inertia Forex Trading Signals

Developed by Donald Dorsey and was originally used to trade Stocks & Commodities market, before forex traders took it and started trading the forex market using this indicator.

Dorsey chose to name it "Inertia" because of his interpretation of the market trend. He claimed that a forex market trend is the overall result of inertia and thus it takes more momentum for a trending market to reverse its direction than to continue moving in the same direction. Therefore, a Forex trend is the measurement of market inertia. This is an oscillator that uses the scale of zero to a hundred. Signals are generated using the 50 level center line crossover method.

Forex Inertia Indicator Expert Advisor Setup

In physics, the term Inertia is defined in terms of mass & direction of motion. Using the standard technical analysis, the direction of motion of the trend can be easily defined. However, the mass cannot be easily defined. Dorsey claimed that the volatility of a financial instrument may be the simplest & the most accurate measurement of inertia. This theory led to the use of the Relative Volatility Index (RVI) as the basis to be used as a trend indicator. Therefore Inertia is comprised of: RVI smoothed by a linear regression.

Technical Analysis and Generating Signals

When it comes to trading the currency market using this indicator, the signals generated are fairly simple to interpret. Below are two examples illustrated using forex charts showing how buy and sell signals are generated using Inertia.

Upward Trend - Bullish Buy Signal

If the Inertia is above 50, positive inertia is indicated, this therefore defines the long-term Forex trend as upward as long as the indicator remains above 50. When it crosses to levels below 50 then this is interpreted as an exit signal. The chart below shows an example of how a buy signal is generated.

Upward Trend - Bullish Signal - Forex Inertia Indicator Expert Advisor Setup

Downward Trend - Bearish Sell Signal

If the Inertia is below 50, negative inertia is indicated, this therefore defines the long-term forex trend as downwards as long as the indicator remains below 50. If it goes above 50 then this is interpreted as an exit signal. The currency chart below shows how a sell signal generated.

Downward Trend - Bearish Signal - Forex Inertia Indicator Expert Advisor Setup