InvestorQ : What exactly is meant by momentum and what are momentum oscillators?
rhea Babu made post

What exactly is meant by momentum and what are momentum oscillators?

Answer
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1 year ago


It is one thing to talk about the price change and it is another thing to understand the velocity or the force of price change. The velocity of change is measured by the momentum of stock price movement. Momentum measures the velocity of price changes as opposed to the actual price levels themselves. Momentum is measured by continually taking price differences for a fixed time period. To create a 10 day period momentum line you would subtract the closing price from 10 days ago from the last closing price. This result is then plotted around a zero line. In a way, this is an extension of the moving average approach where gaps are used to smooth the flow of a time series data on a continuous basis. A momentum value above zero indicates that prices are moving up, and below zero indicates moving down. The Momentum oscillators are much easier to understand and to interpret even for the rookie technical analysis and are hence quite popular. Also they reflect the underlying trend of the stock quite effectively.