Momentum Indicator
The Momentum indicator value is defined as the difference between price levels after a specified time period. If for example we take a period of 5, then the Momentum oscillator will be defined as the difference between the current close and the close 5 bars earlier. 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).
Bullish divergence / bearish convergence is the main Momentum signal:
Main Momentum signal
