The Momentum Indicator is a leading indicator which is measuring a security’s rate of change. This is comparing the current price with the previous price from a number of periods ago. The ongoing plot forms an oscillator that moves above and below 0. It is a fully unbounded oscillator and it has no lower or upper limit. This indicator is often used in combination with other technical indicators and other signals. In this Momentum indicator is a speed of movement indicator designed to identify the speed or strength of price movement.
The Momentum indicator is also available in the STUDIES section in the Zerodha Kite terminal. You can attach the indicator to any daily or intraday charts. Check the image below to understand how we attached the indicator in HDFC Bank share price chart and what are the default parameters. The default parameters are 14, however, you can change the PERIOD as per your convenience.
For Momentum Potential Buy Signal :
The bullish or bearish signals are derived by the crossing of the zero line as in few other indicators like MACD or Moving Average Convergence Divergence indicator. When this Momentum indicator crosses above the zero line from below. The crossing of the zero line implies which is the price of the stock, future, or currency pair is reversing course. Either by having bottomed out or by breaking out above recent highs. This is typically viewed as a bullish signal or a buy signal.
For Momentum Potential Sell Signal :
When the Momentum indicator crosses below the zero lines from above. In this a cross of the zero lines can generate two things which are the future, currency pair, or stock’s price has topped out, is reversing or that the price has broken below recent lows. In either way, these events are often interpreted by traders as bearish signals or sell signals.
Ankita has done her Diploma Engineering in Computer Science & Technology. She is pursuing her degree in Engineering and also well experienced in the equity market and real estate related content writing. She is the one who has developed the technical indicators section of our site.