Home
Momentum is the changing velocity of a price when related to security analysis. Momentum indicators are designed to track momentum in the price of a tradable to help identify the relative enthusiasm of buyers and sellers involved in the price trend development. Usually, the momentum indicator compares the most recent closing price to a previous closing price, but it can also be used on other indicators such as moving averages. The momentum indicator is usually displayed as a single line. The indicator measures overbought and oversold market conditions. It’s usually plotted on a chart using negative numbers with a scale ranging from 0 to -100.
Calculation of Momentum
M = CP – CPn
Or
M = (CP / CPn) * 100
Where M is Momentum CP is closing price CPn previous closing price
The Williams Percent R is another indicator that measures overbought and oversold levels similar to the slow stochastic oscillator. Momentum indicators are designed to track momentum in the price of a tradable to help identify the relative enthusiasm of buyers and sellers involved in the price trend development.