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MOMENTUM
Doug Schaff
FX-Strategy
| Characteristic: | Momentum Indicator | ||
| Parameter Defaults: | Momentum Period | 12 | controls the measurement period for momentum |
| Plots: | Momentum | ||
The Momentum Indicator is the most basic form of measurement of price direction and velocity. It is an exceptionally simple formula that merely represents price movement from the one bar to a bar "x" periods prior.
Momentum = Pricet – Pricet-1
By subtracting the price of (say) 12 periods ago from the current price it will produce a number of points that will be above zero (if price is now higher) or below zero (if price is now lower). From this we can deduce:
| • | Momentum below zero and moving lower | –price is accelerating lower |
| • | Momentum below zero but rising | –price is generally moving lower but at a slower pace |
| • | Momentum above zero and rising | –price is accelerating higher |
| • | Momentum above zero but declining | –price is generally moving higher but at a slower pace |
