The Momentum indicator is one of the most popular oscillators of forex technical analysis showing the rate of price change, or in other words, the rate of price change, being one of the simplest and most effective tools of technical analysis.
Momentum Simple = C - Cn Where C is the closing price of the current period. Where C-n is the closing price of N periods back. Note: in modern textbooks there is a disagreement about the formulas Momentum. The above formula is taken from Murphy's "Technical analysis of futures markets" and most likely it is the right one.
There is another variation in calculating the indicator Momentum from the book Akelis. Technical analysis from A to Z, in which Momentum coincides with Rate of Change and the formula is used:
Where C is the closing price of the current period Where C-n is the closing price of N periods back. Unfortunately, this formula in its time migrated to many technical analysis programs.
There is also a separate formula called Chande Momentum Oscillator (CMO)
Chande Momentum Oscillator is calculated as follows:
MomentumSimple = C-C-1 Where C is the closing price of the current period Where C-1 is the closing price of the previous period. If MomentumSimple> 0, then M1 = MomentumSimple, and M2 = 0; If MomentumSimple <0, then M2 = -MomentumSimple, and M1 = 0;
Momentum (Momentum) is the simplest trend indicator. Its formula is so simple and intuitive that it does not require a description. Exceeding the current closing prices over the past, shows an uptrend, and if the current prices are lower than the past for the selected time interval, this means a downtrend.
Sometimes a smoothed momentum is used to reduce its volatility. For these purposes, moving averages are used.
The indicator in most cases is ahead of the main price movement. Before the top of the trend indicator turns around (prices in this case usually continue to grow) and begins to fall, only after that the trend usually turns down. Before the market's low, the indicator slows down (prices usually continue to fall, but at a slower pace), unfolds and begins to grow, after which the trend turns up.
Disadvantages of the momentum indicator, the same as in many other indicators: it changes rapidly when entering the calculation of new prices very different from the main channel and when they exit from the calculation. This behavior gives greater instability of results.
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