Momentum

Presentation Momentum :

Momentum and Rate Of Change (ROC) are two indicators that measure the speed of progression of a title.
The ROC measures the percentage of increase during the day and the yan of it period. The present growth momentum in the form of a ratio (during the day compared to that of he yan period).

When the ROC and the momentum increases, the increase in security has been higher than it was yan period (the title up quickly). The title is considered overbought. Conversely, when both indicators are below the title is considered oversold.

It is important to note that the momentum term also designates a family of indicators to assess the rate of progression courses.

Application to the trading and investment:

The ROC as Momentum indicators are the family of oscillators. The ROC will oscillate around the axis 0 (0: the title has not improved compared to that of period there are n,> 0 the stock has increased, <0> 100: the closing date is later).


For the analysis it is important to observe the direction and rate of progression of these two indicators.
More indicators will increase rapidly over the course of progression is rapid and strong. Unlike most indicators more quickly reduce the price to drop rapidly and sharply.


We can identify two important areas:

* The overbought zone: very high indicator

* The oversold zone: very weak indicator


Caution: for each value or index, the areas of purchase and are on sale to determine the history. Each value has a level on procurement and on specific sales.

The investor will pay particular attention to turning indicators in these areas have a high probability to indicate a change in price trends.
The signal is bearish if these indicators will pass down the box on purchase. Conversely, it will be bullish when crossing the area up on sale.