Momentum

Momentum is generally thought of as the difference between prices. A momentum study is calculated by subtracting a previous price from the current price. If the previous price is greater than the current price, the study yields a negative value; conversely, if the previous price is less than the current price, the difference is a positive value.

Formula:

Where:

MOM = current momentum value

Pt = current price

Pt-n = price n periods ago

You define the previous price used to calculate the momentum by setting the Periods field in the Moving Average Momentum parameters menu.

Momentum studies are to indicate the rate of change in prices, trends, and price extremes. High positive and negative values are commonly interpreted as overbought and oversold conditions, respectively.

Parameters

Parameter

Function

Color

Default color is yellow. To change the color, click on the color button:

Then choose the color you want from the Color Menu.

Graph

Sets the drawing method for the study.

Option	Function
Bars	Renders the study as bars.
Dots	Renders the study as dots.
Dotted	Renders the study as dots.
Histogram	Renders the study as a histogram drawn from 0.
Line (Default)	Renders the study as a line.
Not Drawn	The study is not rendered.

Line Style

Sets the rendering technique of the graph parameter (if it is set to Line).

Option	Function
Dash-Dot	--l-l-l-l-l-l-
Dash-Dot-Dot	----ll----ll----
Dashed	- - - - - - - - - - - - - - -
Dotted	llllllllll
Solid (Default)	-------------------------

Line Width

Sets the tickness of the study line.

Option	Function
1 pixel (Default)
2 pixels
3 pixels
4 pixels
5 pixels

Period

Default is 10

Price

The price on which the study is calculated:

Option	Function
Close	Closing price (Default).
First Study	Calculates the study using the values of the first study in the window.
H, L Midpt	Calculates the study on the mid-point of the high and low.
H, L, C Avg.	Calculates the study on the average of the High, Low, and Close.
High	High price.
Low	Low price.
Open	Opening price.
Tick Average	Calculates the study on the average of ticks in the period.

see, Kaufman, P. J., The New Commodity Trading Systems and Methods, New York: John Wiley & Sons, 1987.