Oscillators: Momentum Indicator

Momentum indicator value is defined as the difference between price levels after a specified time period. If, for example, we take period 5, then the Momentum oscillator will be defined as the difference between the current close and the close 5 bars before. All negative and positive values are displayed on the chart with a zero line in the middle.

In MetaTrader 4, the Momentum indicator is defined not as the difference, but the correlation between the current price and the price n periods before:

MOMENTUM = CLOSE (i) / CLOSE (i - n) * 100

Where:

• CLOSE (i) — current bar close;
• CLOSE (i - n) — close n bars before.
  

Momentum signals:

• if the indicator is below 100, then the market is bearish;
• if above 100 then the market is bullish;
• if the indicator is around 100, it signifies a flat market;
• bullish divergence / bearish convergence - the main signal of the weakness of the prevailing trend;
• in a flat market, exit from the overbought (oversold) areas is a signal to sell (buy).

In order to add Momentum indicator to the active chart in MetaTrader 4, use the "Insert -> Indicators -> Oscillators -> Momentum" menu sequence.

Bullish divergence / bearish convergence is the main Momentum signal:

Warning: This document does not constitute an offer or a recommendation to enter into any transaction. All views and statements expressed are believed to be true and accurate when published. Any person relying on this information to trade does so entirely at his/her own risk. The markets can be very volatile. Prices may move rapidly against you, and past performance is not necessarily a guide to future performance.