Direct answer
There is no verifiable answer to “which forex indicator is most profitable” in general, because profitability is not a property of an indicator alone. In the scope of momentum indicators, different measures (for example, indicators built around price rate-of-change or trend strength) may work better under certain market regimes, but there is no universally confirmed “most profitable” momentum indicator without specifying a complete test setup (market, timeframe, rules, costs, and evaluation method).
How momentum indicators work (and why that affects profitability)
Momentum indicators are tools that quantify how strongly price is moving, or how quickly it is changing. They typically translate market movement into a value you can compare to a threshold or to its recent history. Common internal mechanics include:
- Rate-of-change: measures how far price has moved over a lookback period.
- Distance/oscillation from a reference: measures how stretched price is relative to a baseline.
- Relative strength: compares movement strength over time, sometimes mixing price and volume.
A key point: even if a momentum indicator “detects” movement, profitability depends on the full decision process built on top of it. That includes when an indicator reading becomes a trade decision, how position size and exits are defined, and how the strategy is evaluated.
Example comparison approach (criteria, not claims)
To answer the prompt in a way that is independently checkable, compare momentum indicators using the same evaluation criteria and rules. The comparison should cover both options per criterion (at minimum):
- Signal-to-noise behavior: How often does the indicator produce similar readings during sideways versus trending periods?
- Sensitivity vs stability: Do small parameter changes (like lookback length) dramatically change results?
- Cost awareness: Do the implied entries/exits create frequent turnover that would be harmed by spreads and commissions?
- Timeframe robustness: Does performance persist when you shift from one timeframe to another?
Across these criteria, you may find that one momentum indicator is “better” under a narrow set of assumptions, but that is different from being most profitable in general.
Limitations and risks (what you cannot conclude)
- No real-time certainty: Without live data and ongoing validation, you cannot claim current or future profitability.
- No universal ranking: Markets switch regimes, so an indicator that fits one period can degrade in another.
- Hidden assumptions: Backtests can be overfit if you tune parameters to past outcomes.
- Evaluation must be complete: Omitting transaction costs, slippage, or realistic execution assumptions can turn an indicator strategy into a misleading result.
Because “most profitable” is a test outcome, not a fixed indicator trait, the only defensible answer is conditional: the most profitable momentum indicator is the one that performs best for a specific, fully defined strategy and market conditions—validated with transparent, repeatable testing.