Momentum

Momentum is the difference between the current price and the price X-time periods ago. The difference is displayed in points and is referred to as Momentum or Price Change.

Study Type: Stand-alone

Description

Momentum is defined as the current close or settlement price minus the settlement price of X-periods ago, where X is defined by the first argument. The positive or negative price difference is plotted around the zero line. The second plot is the Y-period moving average of the momentum, where Y is defined by the second argument.

Momentum displays the wave-like motion in an oscillator format, plotted around a zero line, by measuring the amount that prices have changed over a given time period. As prices increase, the momentum rises; as prices fall, the momentum falls. The greater the change in prices, the greater the change in momentum.

Momentum is most commonly used as an overbought/oversold indicator. When the indicator moves from positive to negative, the market direction is changing.

Parameters

• Period: (10) - the number of bars, or period, used for the first plot.
• Movement: (20) - the number of bars, or period, used for the second plot.