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.

Trading strategy

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

 

Capture d’écran 2018 11 01 à 14.06.16

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. 


Want to learn more? The following articles may be of interest to you

Relative Strenght Index (RSI)

MACD

Commodity Channel Index (CCI)” 

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