Momentum (chart analysis)
The momentum (engl. For force, momentum, pulse ) referred to in the chart analysis , a concept for measuring the strength of a price movement . To do this, the price change within a certain period of time is measured in various ways.
Momentum indicator
The technical indicator called "Momentum" (often abbreviated as MOM) represents the absolute price difference between two points in time and thus corresponds to the difference quotient , multiplied by the constant factor n . The indicator is intended to provide information about the strength or weakness of the trend.
The indicator is calculated according to the following formula:
The following events are signaled:
- an existing upward trend is accelerating: momentum positive and rising
- an existing upward trend is slowed: momentum positive and falling
- an existing downtrend is accelerating: momentum negative and falling
- an existing downtrend is slowed: negative and rising momentum
Rate of Change (ROC)
The rate of change indicator is practically identical to the momentum indicator, only the relative price differences are used here.
For representations where the momentum or the ROC fluctuates around zero, the ROC is defined as follows:
The difference between the current closing price and the closing price n days ago is set in relation to the closing price n days ago and the quotient is multiplied by 100 if necessary in order to obtain a relative change in% to the closing price n days ago. It is also common to omit the multiplication by 100. In both cases the value fluctuates around 0. Crossing this axis leads to buy signals when the curve is rising and to sell signals when the curve is falling.