Momentum - Momentum is a price and time related indicator.

It calculates the changes the price in a specified period of time. The time frame can be defined.

Momentum is a trend indicator, therefore it should be used in a trending market.

When the market is trading, we use other indicators.

Buy and sell signals in momentum generate when movement swings from it's relative high and lows.

When momentum tops the turn you sell.

When it bottoms then turns you buy.

Another way to use momentum is as a leading indicator.

To do this we look at possible divergences in momentum.

If the price makes new lows without making new lows in momentum, we can conclude that the price will go up.

If the price makes new highs without new highs in momentum we can conclude the price will go down.

Extreme highs or lows in momentum indicate a continuation in the current trend.

The momentum reaches extremely high levels if the indicator raised above it's usual highs.

Here we can see extremely high value in momentum.

Observe this is higher then previous highs.

A swing in momentum will reveal the price will reverse.

But the up trend will continue and the price should remain.

On the down side momentum reaches extremely low low values when the bottom is lower than it's usual lows.

Here we see momentum makes a lower low than it's usual low.

A swing in momentum at such levels indicate the price will up, but the current trend will continue.