Momentum And Strength Of Trends

The technical indicator momentum showcases the rate of change. This rate of change shows the closing price of today's market and the closing price of a specific period of time "N." The difference between the two is the 'momentum.' Each day the ROC or momentum changes due to the changing market closing price.

Momentum is used to establish various trends. For example, if the momentum (rate of change) is continuously positive it means that a trend is sustained and negative, sustained. Many use this chart indicator to analyze when to buy or sell. For example, many market analysts say when it crosses through zero, then it's time to buy and vice versa, time to sell. The trend's strength is determined by how high or low the plotting points are.

This momentum method shows the absolute change taking into account no factors of why this is occurring. Percentages are analyzed over "N" period of time in proportional ways. The crossings are mapped and analyzed so when to buy and/or sell securities or stocks to ensure satisfaction within one's market decisions. The rate of change is mapped with a central line, while the lower half of the chart showcases the difference in the closing prices of the days plotted.

Want To Test These Indicators On A Real Trading Platform WIth Zero Pips?

Open a free account and Download MT4 Platform. With this you can trade direct from charts and test all the built in indicators. It really is one of the best charting packages available.

More Chart Indicator Guides

The MACD Indicator - Moving Avergage Convergence Divergence
Moving Avergages and Parabolic SAR
RSI Indicator - Relative Strength Index
Bollinger Bands Indicator
Fast and Slow Stochastic Indicators
The Money Flow Index Indicator
Chaikin Indicator
The Average Directional Movement Index (ADX)

If you like these guides, please show us you care and share them on Facebook, Google and Twitter with the buttons found above each article. We really appreciate it!