What is momentum?
A key indicator of technical analysis, it belongs to the oscillator family and makes it possible to measure the strength of price movements.
Its calculation is very simple. Momentum = Closing of the price of the period – Closing of the period n chosen.
It is an unbounded oscillator, which means that its value can be less than 0 and greater than 100.
Like many other indicators, trading strategies with a momentum indicator can be diverse:
- Buy when momentum is very low and sell when it is very high.
- Buy when the indicator crosses line 0 (neutrality) upwards and sell when it crosses it downwards
- Use the figures that momentum draws like the ones drawn by the courts
- Finally, the reading of the divergences
Of all the strategies that can be used on the momentum indicator, it is often the divergences that obtain the best results. Here on Bitcoin, on a daily chart.
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