Momentum

Description

Momentum indicator shows an acceleration of price movement. From technical point of view it is the difference between current price and close price N-periods ago. Firstly introduced by John J. Murphy in "Technical Analysis of the Financial Markets" Momentum fixedly joined to traders arsenal. In spite of age this indicator is still actual and widely used

Formula

Momentum = Close - Close(N-periods ago)

Where: Close - current close price Close(N-periods ago) - the close price N-periods ago

Most useful cases

Trend indicating - crossing a zero line could be used as an indicator of a new trend wave.

• Divergence/Convergence - Divergence/Convergence pattern is a form of price action when new high(low) of the price not confirmed with a new high/low of Momentum. Such price and indicator’s behavior can be interpreted as the weakness of current existing trend.