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Thread: Momentum

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    Default Momentum

    Characteristic: Momentum Indicator
    Parameter Defaults: Momentum Period 12 controls the measurement period for momentum
    Plots: Momentum

    The Momentum Indicator is the most basic form of measurement of price direction and velocity. It is an exceptionally simple formula that merely represents price movement from the one bar to a bar "x" periods prior.

    Momentum = Pricet Pricet-1

    By subtracting the price of (say) 12 periods ago from the current price it will produce a number of points that will be above zero (if price is now higher) or below zero (if price is now lower). From this we can deduce:

    Momentum below zero and moving lower price is accelerating lower
    Momentum below zero but rising price is generally moving lower but at a slower pace
    Momentum above zero and rising - price is accelerating higher
    Momentum above zero but declining - price is generally moving higher but at a slower pace

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    Default

    Just Added Information from http://www.metaquotes.net/techanalys...ators/momentum




    The Momentum Technical Indicator measures the amount that a securitys price has changed over a given time span.
    There are basically two ways to use the Momentum indicator:
    • You can use the Momentum indicator as a trend-following oscillator similar to the Moving Average Convergence/Divergence (MACD). Buy when the indicator bottoms and turns up and sell when the indicator peaks and turns down. You may want to plot a short-term moving average of the indicator to determine when it is bottoming or peaking.
      If the Momentum indicator reaches extremely high or low values (relative to its historical values), you should assume a continuation of the current trend. For example, if the Momentum indicator reaches extremely high values and then turns down, you should assume prices will probably go still higher. In either case, only trade after prices confirm the signal generated by the indicator (e.g., if prices peak and turn down, wait for prices to begin to fall before selling).
    • You can also use the Momentum indicator as a leading indicator. This method assumes that market tops are typically identified by a rapid price increase (when everyone expects prices to go higher) and that market bottoms typically end with rapid price declines (when everyone wants to get out). This is often the case, but it is also a broad generalization.
    As a market peaks, the Momentum indicator will climb sharply and then fall off diverging from the continued upward or sideways movement of the price. Similarly, at a market bottom, Momentum will drop sharply and then begin to climb well ahead of prices. Both of these situations result in divergences between the indicator and prices.


    Calculation

    Momentum is calculated as a ratio of todays price to the price several (N) periods ago.
    MOMENTUM = CLOSE(i)/CLOSE(i-N)*100

    Where:
    CLOSE(i) is the closing price of the current bar;
    CLOSE(i-N) is the closing bar price N periods ago.
    Remember.
    Trading is not a sprint but a marathon. Compounding money is a powerful thing.
    Be patient and persistent
    Exercise discipline
    Always, Always use stops loss
    Protect your profits at all times.
    Accept your losses like a man. If you cant accept your losses you will become a nerverous trader.
    When in doubt stay out.

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