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Novice Traders' Notebook | APR 2004
Novice Trader’s Notebook: Momentum by Amy Wu
Stocks & Commodities V. 22:4 (74): Novice Trader’s Notebook: Momentum by Amy Wu MOMENTUM The momentum indicator was first presented in J. Welles Wilder’s ""New Concepts In Trading Systems"" and has since become a popular technical tool. Price momentum is defined as the measure of velocity of price change or market speed. The difference method for calculating a momentum indicator is the following: have n be the time period (usually 14 days), then subtract the close n periods ago from the present close period. If both of these closing values are identical, then the difference is zero. If the present close is smaller than the previous close, the momentum will be negative. Likewise, if the present close is greater than the previous close, the momentum will be positive. This indicator is an oscillator because the values are determined by their place above, below, or on the zero line. Above the zero line, go long; below the zero line, go short.
by Amy Wu
Technical Analysis of STOCKS & COMMODITIES
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