Momentum Indicator

As its name suggests, this indicator purely analyzes the momentum of the price. It is measured by comparing the current price to it a specific number of periods ago. If the current price is higher than it was, for example, ten periods ago, the momentum line increases. On the other hand, when the current price is lower than the one in the past, the line decreases. A trader can obtain buy and sell signals when the momentum changes its sign. The Momentum indicator switches from positive to negative, and the other way around, depending on price changes. When it changes from negative to positive, the bulls are more present in the market and the indicator signals a buy. However, if the momentum line goes the negative area, it means that the bears are taking over, which generates a sell signal. You can easily combine the Momentum with other indicators in the section Strategy.