Momentum/Velocity Signals - User Guide

User Guide - Early Detection of Price Acceleration

Table of Contents

  1. Overview
  2. Signal Types Explained
  3. Configuration Parameters
  4. Optimized Configurations by Strategy
  5. Quick Reference Table
  6. Signal Broadcasting
  7. Best Practices
  8. Example Use Cases
  9. Troubleshooting
  10. Advanced Tips
  11. Performance Optimization
  12. Conclusion

1. Overview

Momentum and Velocity signals detect the speed and acceleration of price movements, helping identify strong directional moves before they fully develop. These signals are crucial for capturing rapid price changes across different trading timeframes.

Supported Actions:

MOMENTUM_BUY - Strong upward price movement detected
MOMENTUM_SELL - Strong downward price movement detected

2. Signal Types Explained

Momentum Signals

Measures the magnitude of price change over a specific period. Shows how much the price has moved up or down.

(Current Price - Price N periods ago) / Price N periods ago × 100

Velocity Signals

Measures the rate of change - how fast momentum is building or declining. Indicates acceleration or deceleration of price movement.

(Current Momentum - Previous Momentum) / Time Period

3. Configuration Parameters

Core Settings

enable_momentum_signal: true

Enable or disable momentum/velocity signal detection.

Momentum Thresholds

momentum_strong_buy: 2.0      # Bullish threshold (% change)
momentum_strong_sell: -2.0    # Bearish threshold (% change)
  • momentum_strong_buy: Minimum positive percentage change to trigger buy signal
  • momentum_strong_sell: Minimum negative percentage change to trigger sell signal

Velocity Thresholds

velocity_extreme_buy: 1.0     # Bullish velocity (% per period)
velocity_extreme_sell: -1.0   # Bearish velocity (% per period)
  • velocity_extreme_buy: Rate of momentum acceleration for extreme bullish moves
  • velocity_extreme_sell: Rate of momentum acceleration for extreme bearish moves

Lookback Period

momentum_lookback_period: 5

Number of periods to calculate momentum. Shorter = more sensitive, Longer = more reliable.

4. Optimized Configurations by Strategy

1. SCALP TRADING (Quick Entries/Exits)

Best Intervals: 1m, 3m, 5m

1-Minute Scalping

enable_momentum_signal: true
momentum_strong_buy: 0.3
momentum_strong_sell: -0.3
velocity_extreme_buy: 0.15
velocity_extreme_sell: -0.15
momentum_lookback_period: 3

Rationale: Ultra-sensitive settings capture micro-movements. Very short lookback for rapid response.

3-Minute Scalping

enable_momentum_signal: true
momentum_strong_buy: 0.5
momentum_strong_sell: -0.5
velocity_extreme_buy: 0.25
velocity_extreme_sell: -0.25
momentum_lookback_period: 4

Rationale: Slightly higher thresholds reduce noise while maintaining responsiveness.

5-Minute Scalping

enable_momentum_signal: true
momentum_strong_buy: 0.8
momentum_strong_sell: -0.8
velocity_extreme_buy: 0.4
velocity_extreme_sell: -0.4
momentum_lookback_period: 5

Rationale: Balanced settings for capturing short-term momentum bursts with better signal quality.

2. DAY TRADING (Intraday Positions)

Best Intervals: 15m, 30m, 1h

15-Minute Day Trading

enable_momentum_signal: true
momentum_strong_buy: 1.2
momentum_strong_sell: -1.2
velocity_extreme_buy: 0.6
velocity_extreme_sell: -0.6
momentum_lookback_period: 6

Rationale: Filters out noise from scalping timeframes while catching meaningful intraday trends.

30-Minute Day Trading

enable_momentum_signal: true
momentum_strong_buy: 1.8
momentum_strong_sell: -1.8
velocity_extreme_buy: 0.9
velocity_extreme_sell: -0.9
momentum_lookback_period: 7

Rationale: Higher thresholds for cleaner signals on established intraday momentum.

1-Hour Day Trading

enable_momentum_signal: true
momentum_strong_buy: 2.5
momentum_strong_sell: -2.5
velocity_extreme_buy: 1.2
velocity_extreme_sell: -1.2
momentum_lookback_period: 8

Rationale: Captures sustained hourly momentum with reduced false signals.

3. SWING TRADING (Multi-Day Positions)

Best Intervals: 2h, 6h, 12h

2-Hour Swing Trading

enable_momentum_signal: true
momentum_strong_buy: 3.0
momentum_strong_sell: -3.0
velocity_extreme_buy: 1.5
velocity_extreme_sell: -1.5
momentum_lookback_period: 10

Rationale: Focuses on stronger, more sustained momentum shifts suitable for multi-day holds.

6-Hour Swing Trading

enable_momentum_signal: true
momentum_strong_buy: 4.5
momentum_strong_sell: -4.5
velocity_extreme_buy: 2.0
velocity_extreme_sell: -2.0
momentum_lookback_period: 12

Rationale: Identifies significant trend changes with high reliability, filtering short-term volatility.

12-Hour Swing Trading

enable_momentum_signal: true
momentum_strong_buy: 6.0
momentum_strong_sell: -6.0
velocity_extreme_buy: 2.5
velocity_extreme_sell: -2.5
momentum_lookback_period: 14

Rationale: Captures major momentum shifts for longer swing positions with minimal noise.

4. LONG-TERM TRADING (Position/Investment)

Best Intervals: 1d (Daily)

Daily Long-Term

enable_momentum_signal: true
momentum_strong_buy: 8.0
momentum_strong_sell: -8.0
velocity_extreme_buy: 3.0
velocity_extreme_sell: -3.0
momentum_lookback_period: 20

Rationale: Focuses exclusively on major trend changes and macro momentum shifts. Ignores daily noise.

5. Quick Reference Table

Strategy Interval Momentum Buy/Sell Velocity Buy/Sell Lookback
Scalp1m±0.3%±0.15%3
Scalp3m±0.5%±0.25%4
Scalp5m±0.8%±0.4%5
Day15m±1.2%±0.6%6
Day30m±1.8%±0.9%7
Day1h±2.5%±1.2%8
Swing2h±3.0%±1.5%10
Swing6h±4.5%±2.0%12
Swing12h±6.0%±2.5%14
Long1d±8.0%±3.0%20

6. Signal Broadcasting

Configure which signals to broadcast to external platforms:

supported_volatility_action:
  - "MOMENTUM_BUY"
  - "MOMENTUM_SELL"

supported_volatility_action_broadcast:
  - "MOMENTUM_BUY"
  - "MOMENTUM_SELL"

Broadcasting Channels:

  • Discord
  • Telegram
  • WhatsApp

Only signals matching the supported_volatility_action_broadcast list will be sent to external platforms.

7. Best Practices

1. Match Strategy to Timeframe

  • Scalping: Use 1m-5m intervals with tight thresholds
  • Day Trading: Use 15m-1h intervals with moderate thresholds
  • Swing Trading: Use 2h-12h intervals with wider thresholds
  • Long-term: Use daily intervals with very wide thresholds

2. Adjust for Market Conditions

High Volatility Markets (Crypto, Small Caps):

  • Increase thresholds by 20-40% to avoid false signals
  • Example: 1m scalping → momentum_strong_buy: 0.4 instead of 0.3

Low Volatility Markets (Blue Chips, Forex Majors):

  • Decrease thresholds by 20-30% to catch smaller moves
  • Example: 1h day trading → momentum_strong_buy: 1.8 instead of 2.5

3. Lookback Period Guidelines

  • Shorter lookback (3-5): More sensitive, faster signals, more noise
  • Medium lookback (6-10): Balanced sensitivity and reliability
  • Longer lookback (12-20): Smoother signals, less responsive

4. Combine with Other Indicators

Momentum signals work best when combined with:

  • Volume confirmation (high volume on momentum spikes)
  • Support/resistance levels (momentum at key levels)
  • Trend indicators (momentum aligned with trend direction)
  • RSI/MACD (confluence of momentum indicators)

5. Risk Management

  • Scalping: Stop loss at 0.3-0.5% of entry
  • Day Trading: Stop loss at 1-2% of entry
  • Swing Trading: Stop loss at 3-5% of entry
  • Long-term: Stop loss at 8-12% of entry

8. Example Use Cases

Case 1: Crypto Scalping (1m)

enable_momentum_signal: true
momentum_strong_buy: 0.4        # Crypto is volatile
momentum_strong_sell: -0.4
velocity_extreme_buy: 0.2
velocity_extreme_sell: -0.2
momentum_lookback_period: 3

Scenario: BTC/USDT on 1m chart. Price jumps 0.5% in 3 periods → MOMENTUM_BUY signal fires → Enter long → Exit on velocity reversal or 0.4% profit target.

Case 2: Stock Day Trading (30m)

enable_momentum_signal: true
momentum_strong_buy: 1.5        # Stocks less volatile than crypto
momentum_strong_sell: -1.5
velocity_extreme_buy: 0.8
velocity_extreme_sell: -0.8
momentum_lookback_period: 7

Scenario: AAPL on 30m chart. Price drops -1.6% over 7 periods → MOMENTUM_SELL signal → Enter short → Cover on momentum reversal or target.

Case 3: Forex Swing Trading (6h)

enable_momentum_signal: true
momentum_strong_buy: 3.5        # Forex has lower volatility
momentum_strong_sell: -3.5
velocity_extreme_buy: 1.5
velocity_extreme_sell: -1.5
momentum_lookback_period: 12

Scenario: EUR/USD on 6h chart. Strong 4% rally over 12 periods → MOMENTUM_BUY → Hold for multi-day swing → Exit on daily resistance or momentum fade.

9. Troubleshooting

Problem Solution
Too Many Signals (Over-trading)
  • Increase momentum thresholds by 20-30%
  • Increase lookback period by 2-3 periods
  • Add minimum volume filter
Missing Good Moves (Under-trading)
  • Decrease momentum thresholds by 10-20%
  • Decrease lookback period by 1-2 periods
  • Check if velocity thresholds are too high
False Breakout Signals
  • Increase velocity thresholds (confirms acceleration)
  • Require momentum + velocity confluence
  • Add volume confirmation requirement
Lagging Entries
  • Decrease lookback period
  • Lower momentum thresholds slightly
  • Consider using shorter interval

10. Advanced Tips

1. Momentum Divergence

Watch for price making new highs/lows while momentum weakens → potential reversal signal.

2. Velocity Spikes

Extreme velocity readings (2x normal threshold) often precede exhaustion → consider counter-trend trades.

3. Multi-Timeframe Confirmation

Check momentum on higher timeframe before trading lower timeframe signals:

  • Scalp 1m → Confirm with 5m momentum
  • Day 15m → Confirm with 1h momentum
  • Swing 6h → Confirm with daily momentum

4. momentum Zones

Create custom zones:

  • Extreme momentum: >3x threshold (overbought/oversold)
  • Strong momentum: 1.5-3x threshold (trend continuation)
  • Weak momentum:

11. Performance Optimization

Backtesting Recommendations

Test each configuration with:

  • Minimum 3 months historical data
  • Include different market conditions (bull, bear, sideways)
  • Track win rate, profit factor, max drawdown
  • Optimize thresholds for your specific asset

Live Trading Checklist

  • Verified thresholds match your risk tolerance
  • Tested on demo account for 2+ weeks
  • Broadcasting configured for your notification platforms
  • Stop losses and take profits clearly defined
  • Position sizing calculated based on momentum strength
  • Multiple timeframe analysis completed

12. Conclusion

Momentum and Velocity signals provide powerful early detection of price movements across all trading strategies. The key to success is:

  1. Match configuration to your trading style and timeframe
  2. Adjust thresholds for specific asset volatility
  3. Combine with volume and other confirmations
  4. Backtest thoroughly before live trading
  5. Use proper risk management

Start with the recommended configurations above, then fine-tune based on your backtesting results and live trading experience.

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