Q: Tips

- Momentum is the foundation of many other indicators (ROC, MACD, etc.) - Scale depends on asset price — a 100-point move means different things for different assets - Use percentage-based ROC if you need to compare across assets - Best combined with trend-following indicators for trade confirmation - Watch for Momentum flattening as an early sign of trend weakening

Question 1

What is Momentum?

Accepted Answer

Momentum (MOM) is the simplest momentum indicator. It measures the absolute change in price over a specified number of periods. Unlike ROC which gives a percentage, Momentum gives the raw price difference, making it unbounded and oscillating around zero.

Question 2

How it works

Accepted Answer

Momentum simply subtracts the price N periods ago from the current price: ``` Momentum = Close - Close[N] ``` Positive values mean the current price is higher than N periods ago; negative means lower.

Question 3

Key features

Accepted Answer

- **Above 0** — Price is rising compared to N bars ago - **Below 0** — Price is falling compared to N bars ago - **Rising Momentum** — Acceleration of price movement upward - **Falling Momentum** — Acceleration of price movement downward - **Zero line** — Key reference point for direction changes

Question 4

Buy signals

Accepted Answer

- Momentum crosses above 0 (price now above N-period-ago price) - Momentum is positive and increasing (accelerating uptrend) - Bullish divergence: price makes lower low, Momentum makes higher low

Question 5

Sell signals

Accepted Answer

- Momentum crosses below 0 (price now below N-period-ago price) - Momentum is negative and decreasing (accelerating downtrend) - Bearish divergence: price makes higher high, Momentum makes lower high

Question 6

Parameters

Accepted Answer

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 10 | Number of bars to compare against |

Question 7

Example conditions

Accepted Answer

| Condition | Meaning | |-----------|---------| | `MOM(10) > 0` | Positive price change over 10 bars | | `MOM(10) < 0` | Negative price change over 10 bars | | `MOM(10) cross_over 0` | Momentum turned positive | | `MOM(10) cross_under 0` | Momentum turned negative |

Question 8

Tips

Accepted Answer

- Momentum is the foundation of many other indicators (ROC, MACD, etc.) - Scale depends on asset price — a 100-point move means different things for different assets - Use percentage-based ROC if you need to compare across assets - Best combined with trend-following indicators for trade confirmation - Watch for Momentum flattening as an early sign of trend weakening