What is Momentum Indicator? How to use Momentum indicator?

What is Momentum Indicator?

      The Momentum Indicator is used to measures the amount that a currency’s price has changed more than a given time period.

 How to use Momentum indicator?

      Momentum indicator is used to calculate the trend; it is similar to the Moving Average Convergence Divergence. It Provide Buy signal when the indicator’s bottom turn up, same as sell when indicator peak turns down. Momentum indicator reaches particularly high or low values comparing to history values, you should guess an extension of the current trend. Trader can use this as leading indicator.

      This indicator method assumes that market tops are normally recognized by a fast price highs and that market bottoms usually end with fast price lows. But it is also a broad simplification.

Calculation:

In this calculation is comparison ratio of today price to several periods ago.

           MOMENTUM = CLOSE (i)/CLOSE (i-N)*100

CLOSE(i) - Closing price of the current bar
CLOSE(i-N) - Closing bar price N periods ago