Oscillators: Momentum Indicator

Momentum indicator value is defined as the difference between price levels after a specified time period. If, for example, we take period 5, then the Momentum oscillator will be defined as the difference between the current close and the close 5 bars before. All negative and positive values are displayed on the chart with a zero line in the middle.

In MetaTrader 4, the Momentum indicator is defined not as the difference, but the correlation between the current price and the price n periods before:

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

Where:

• CLOSE (i) — current bar close;
• CLOSE (i - n) — close n bars before.
  

Momentum signals:

• if the indicator is below 100, then the market is bearish;
• if above 100 then the market is bullish;
• if the indicator is around 100, it signifies a flat market;
• bullish divergence / bearish convergence - the main signal of the weakness of the prevailing trend;
• in a flat market, exit from the overbought (oversold) areas is a signal to sell (buy).

In order to add Momentum indicator to the active chart in MetaTrader 4, use the "Insert -> Indicators -> Oscillators -> Momentum" menu sequence.

Bullish divergence / bearish convergence is the main Momentum signal: