Momentum Analysis

Momentum Analysis

Momentum is another word for the rate of change of the price of security moving through space and time. To calculate the rate of change, (momentum analysis)  you may take the closing price and subtract the closing price from 10 days ago.  Momentum covered a number of technical indicators that calculated in various ways. You can measure the momentum in many difference ways because you have four price bar component to work as well as the various definition of high-low and open-close range to use for context.

In this article, I have introduced some momentum indicators and review how to use them. To calculate the rate of change, you may take the closing price and subtract the closing price from 10 days ago.  Repeat this process every day for a month you get an indicator. The purpose of momentum measures is to identify the pace of market actions. The pace is fast during a sell-off as well as slows down when the price of shares reaches a new high or low. Momentum indicators compare the price of today with the price of x period ago. If the higher difference between price today with the price of x period ago then higher means a fast speed.

The momentum analysis removes directional bias and shows only speed. A price that moves $3 from $13 ten days ago has the same momentum has the price that moves $5 from $15 ten days ago.

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