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Momentum

Momentum is generally thought of as the difference between prices. A momentum study is calculated by subtracting a previous price from the current price. If the previous price is greater than the current price, the study yields a negative value; conversely, if the previous price is less than the current price, the difference is a positive value.

Formula:

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Where:

MOM = current momentum value

Pt = current price

Pt-n = price n periods ago

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You define the previous price used to calculate the momentum by setting the Periods field in the Moving Average Momentum parameters menu.

Momentum study are to indicate the rate of change in prices, trends, and price extremes. High positive and negative values are commonly interpreted as overbought and oversold conditions, respectively.

see, Kaufman, P. J., The New Commodity Trading Systems and Methods, New York: John Wiley & Sons, 1987.

See also:

Momentum Function