It is a technical indicator that measures the acceleration and deceleration in price changes between two instants in time, that is, the difference between today’s close and the close “x” sessions ago (usually 10 or 12 sessions). If prices vary by the same amount every day then Momentum is zero, but if prices go up or down more each day, then Momentum accelerates, up or down, respectively. Momentum is plotted on a graph and moves around the central value line “one hundred or zero”. In this way the moment does not indicate the following:
• Momentum rises above the center line (Positive Momentum): Indicates that prices or the upward trend is accelerating. When momentum flattens out or turns towards the center line it indicates that the uptrend is slowing down (although prices are still rising) and therefore you can anticipate a downtrend reversal, initially in the short term. .
• Momentum descends below the central line (negative Momentum): Indicates that the downward trend is accelerating. When the momentum line flattens out or turns around, it indicates that the decline in prices is slowing down and thus may indicate a trend change to the upside, at least in the short term.
Therefore, the sell and buy signals are executed as follows:
• BUY SIGNAL: When the moment crosses the central line upwards and the price is rising. This is a bullish sign.
• SELL SIGNAL: When the moment crosses the central line downwards and the price is falling. This is a bearish sign.
As a consequence of the numerous signals it provides, this indicator turns out to be a good way to operate with it, based on the study of the buy and sell signals that are generated in the extreme values of the indicator.