Index

Momentum

Overview

The Momentum indicator measures the amount that a security's price has changed over a given time span.


Interpretation

The interpretation of the Momentum indicator is identical to the interpretation of the Price ROC. Both indicators display the rate-of-change of a security's price. However, the Price ROC indicator displays the rate-of-change as a percentage whereas the Momentum indicator displays the rate-of-change as a ratio.

There are basically two ways to use the Momentum indicator:


Example

The following chart shows Integrated Circuits and its 12-day Momentum indicator.

Divergences at points "A" and "B" provided leading indications of the reversals that followed.


Index