Traders Toolbox: Momentum

MarketClub is known for our "Trade Triangle" technology. However, if you have used other technical analysis indicators previously, you can use a combination of the studies and other techniques in conjunction with the "Trade Triangles" to further confirm trends.

Momentum measures the change in a commodity's price with time. M = Pc-Pn where M = momentum, Pc = current period's price and Pn = price n periods ago.

The length of time used for the prior period is a matter of personal preference and time horizon of the trader. A narrow window of less than five periods back would be short-term in nature while six to nine periods would be considered intermediate; 10 or more would be a longer time perspective.

The most common value is 10 periods prior. Momentum is positive if today's price is higher than your past period's price and negative if not.

Momentum indicators give their best trading signals when they diverge (go in the opposite direction from prices). There are two types of divergences – bullish and bearish.

Bullish divergence occurs as price falls to a new low while the oscillator refuses to set a new low. This often signals the end of a downtrend.

Conversely, a bearish divergence occurs when price reaches new highs and the indicator doesn't confirm it by also reaching new highs.


You can learn more about Momentum by visiting INO TV.