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many technical indicators are used by traders. Here we discuss Momentum Indicator

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Momentum Indicator

A momentum indicator (MI) shows the rate of change of a security's price, usually displayed as a ratio. Generally, traders take a moving average of the MI (9 days is standard) and buy when it bottoms out, or sell when it tops out. Bottoming out is when the indicator hits a low then turns back up, vice versa for a top out. Be careful though, extremely high or low values (in a historical perspective) can indicate a continuation of the current trend. For example, if the Momentum indicator reaches extremely high values and then turns down, you should assume prices will probably go even higher. It is for this reason that you should usually look for price confirmation before assuming the peak has happened. To use the momentum indicator as a leading indicator, look for divergences between the indicator and price, for example, the indicator flattens or turn down, yet prices are still rising.

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Using Momentum Indicator when day trading, plus swing trading strategies using Momentum Indicator and investing based on the Momentum Indicator indicator