Momentum

Discussion in 'Momentum' started by Profiforex, Nov 18, 2010.

  1. Profiforex

    Profiforex Administrator Staff Member

    The Momentum indicator calculates the value of the price changes during the definite period of time.

    In classical literature the signal to buy occurs when the Momentum indicator forms a trough and starts its growth; the signal to sell occurs when the Momentum indicator reaches its peak and turns down.
    Momentum, as oscillator, is used rarely. The continuation of the current tendency is determined if the Momentum indicator has either very high or very low values.

    [​IMG]

    As it can be noticed, the indicator mostly just follows the price and can be named as the "impaired" version of price.

    As oscillator, this indicator works worse than such indicators as: Stochastic and MACD, while as trend indicator it is worse than even the moving average.

    This indicator can be useful for the beginners, who are not sure in trend and need the evidence that the price is really going up, but not down.

    Calculation:
    Momentum = С - Сх,
    where С — is the closing price of the current bar; and Сх — is the closing price of the bar x days ago.

    When calculating the Momentum, we skip х days, throwing out this information as insignificant. This smoothes wrong signals, but such a rough filtration can cause (and always causes) significant misrepresentations.
     

Share This Page