For installation of the Indicator Momentum on the diagram, we will click the button Indicators at a toolbar and will select from the appeared menu Ocillators - Momentum
After that, appears a window where we can change properties of the exposed indicator. We can select the averaging period, a method, to fix a maximum and a minimum, and also to change visual settings.
In a method we specify the prices to which the indicator is used. These are the prices of closing, opening, maximum, minimum or their different sheaves.
The indicator Momentum (Speed) measures value of the change in price for a certain period. In classical literature the signal to purchase arises if the indicator forms a trough and starts growing;
and a signal to sale - when it reaches a peak and turns down.
Momentum as oscillator is used not so often. The highest or low indicator values of speed assume continuation of the current tendency, but not a turn as at other oscillators.
Apparently, the indicator in many respects simply repeats the price, being its "worsened" version. Therefore the indicator Momentum is used very seldom. As it obviously loses oscillator to such indicators, as Stochastics and MAKD and as the trend indicator loses informtiveness even to moving average.
This indicator is useful only for beginning traders who yet "don't rely on their eyes" and they need confirmation, whether really the price goes up, and not down.
Momentum is calculated on the following formula: where C — the final price of closing, and X C — the closing price X of days back.
In case of Momentum's calculation, we pass X of bars, discarding this information as unnecessary. It smooths the noise a little, however such rough filtering can lead (and permanently brings) to essential distortions.