Methodology: how Trading Edge Momentum works
The Trading Department momentum score: MACD, RSI change and EMA trend combined into one value between −1 and +1, with fixed thresholds and a back-calculation.
Momentum answers a simple question: does the price currently have upward drive, downward drive, or none?
To do this the indicator combines three well-known measures into a single value. Every asset uses the same rules, only closed candles, and no manual intervention.
−1 to +1 Score range · ±0.25 Thresholds for bullish and bearish · 4 Timeframes: 1h, 4h, 1D and 1W
Three measures, one value
- MACD (45 %): Is the trend accelerating or slowing? MACD histogram 12/26/9, relative to its fluctuation over the last 100 candles.
- RSI change (25 %): Is buying pressure increasing or decreasing? RSI 14, smoothed over 5 candles.
- Trend direction (30 %): Is the fast average (EMA 8) above or below the slow one (EMA 21)?
The weighted sum is smoothed over 5 candles, so the state does not flip back and forth with every single candle.
Bullish, neutral, bearish
Bearish below −0.25, neutral in between, bullish above +0.25.
- Bullish: Score above +0.25: price has upward tailwind.
- Neutral: In between: no clear drive. At turning points the state often hovers here for a few candles.
- Bearish: Score below −0.25: price has downward headwind.
The score describes tailwind. It does not predict a price and is not a probability of profit.
Candle colours show something else
The colour of the candles on the chart shows trend strength, not the momentum state. It follows the averages and the ADX:
- Green: Close above EMA 8 and EMA 21, sufficient trend strength (ADX 14 ≥ 18).
- Red: Close below both averages.
- Orange: In between or ADX below 18. A warning, not a short signal.
What the daily state would have done from 2014 to 2026
We applied a simple rule day by day to historical prices, using exactly the formula on this page: when daily momentum turns bearish, move to cash; when it turns bullish, buy back; when neutral, do nothing. The thresholds were not adjusted for this.
Worst drawdown from the peak, holding versus the rule:
- Bitcoin · 2014–2026: Holding: −83 % · Momentum 1D: −61 %
- Bitcoin · crash 10/2025–06/2026: Holding: −53 % · Momentum 1D: −8 %
- Ethereum · 2018–2026: Holding: −79 % · Momentum 1D: −52 %
- Solana · 2023–2026: Holding: −78 % · Momentum 1D: −62 %
- XRP · 2020–2026: Holding: −84 % · Momentum 1D: −76 %
- The downside: less profit in strong years. In 2023 Bitcoin returned +94% with the rule instead of +156%.
- Only about every second trade ended in profit. For Solana and XRP the rule was weaker than holding overall, as it was for Bitcoin from 2020.
- On 4h the rule trades too often, 1W alone reacts too late. The daily chart was the best compromise.
Hypothetical back-calculation with historical prices: spot only, no leverage, no shorts, 0.15% costs per buy or sell. No guarantee and not investment advice. Past results are not a reliable indicator of future results.
All parameters
- MACD: 12/26/9, normalised over 100 candles, weight 45%
- RSI change: RSI 14, smoothing 5, weight 25%
- Trend direction: EMA 8 versus EMA 21, weight 30%
- Score smoothing: 5 candles
- Thresholds: +0.25 / −0.25
- Candle colour: EMA 8/21, ADX 14 from 18
Candles, timeframes and data
- Only closed candles are used, so a state never changes in the middle of a running candle.
- 1h and 4h are very short-term, 1D shows one candle per day, 1W the big picture with a later reaction.
- Prices: Binance for cryptocurrencies, Yahoo Finance for stocks, gold and silver.
Limits
- Momentum follows price. It never enters at the bottom and recognises a turn only once it has happened.
- Sideways phases produce false signals that cost money.
- The indicator is an analysis tool, not investment advice. You make your own decisions.
See for yourself
Bitcoin is free on all timeframes. With Pro you see the same states for the top 200 coins, stocks, gold and silver.