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Momentum Indicator Definition
Momentum Oscillator is an indicator that shows trend direction and measures how quickly the price is changing by comparing current and past prices.
Momentum-indicator.png

How to Use Momentum Indicator In Trading
The indicator is represented by a line, which oscillates around 100. Being an oscillator, momentum should be used within price trend analysis.

Crossing the x-axis:

It is believed that if the indicator climbs above 100 during an uptrend, it is a bullish signal;
Otherwise if the indicator falls below 100 during a downtrend, a bearish signal appears.

Falling out of its normal range:

Extreme points mean that the price has posted its strongest gain or loss for a particular number of moving periods, supporting trend strength;
At the same time if the price movement was too rapid, they may indicate possible overbought and oversold areas.

Divergence patterns:

If the price hits a new high, but the indicator does not, that could mean that investor sentiment is actually lower;
And on the contrary if the price falls to a new low, but the indicator does not support the drop, it is a signal that the trend may end soon.

Momentum Indicator Formula (Calculation)
Momentum = (Current close price / Lagged close price) x 100

How to Install Momentum Indicator in MT4 Charts
Momuntum indicator is standard Metatrader indicators, to put this indicator in your chart, please click Insert >> Indicators >> Oscillator >> Momentum . The default setting momentum indicator is a period of 14 and apply to Close.

 

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Look, if you’re messing around with charts and prices all day (trader life, right?), the Momentum Indicator is kinda like your hype man—it tells you when the market’s actually going wild, not just pretending. It’s super popular for a reason: it straight up shows you how fast and furious those prices are moving. Basically, it stacks the current price against an older price over some period—shows you not just the direction, but whether things are heating up or just sleepwalking.

### So, what’s Momentum, anyway?

Alright, technical jargon aside, Momentum is what the nerds call an oscillator. What does that mean? It bounces up and down around this line, usually set at 100. Instead of just looking where the price is sitting, it shouts, “Whoa! Look at that speed!” when prices are moving quick. So if the trend’s losing gas, you’ll spot it. If it’s starting to sprint, you’ll spot that too.

### How’s it work?

You’ve got this wiggly line jumping above and below 100:

• When it cruises above 100: Bulls are in charge, price is gaining steam. You can almost hear someone yelling, “Buy, buy, buy!” (Kidding, don’t just hop in).
• Drops below 100: Bears got the wheel. That downtrend is picking up speed—definitely a bearish sign.

These “above and below” moves basically help you double-check whether the trend has real muscles or is just bluffing.

### Wild Swings = Extreme Momentum

Sometimes the momentum blasts off to crazy highs or plummets to super lows:

• Way high: Massive price gains, buyers biting each other to get in—probably a bit much, maybe even overbought.
• Way low: Sellers can’t trip over themselves fast enough—could be oversold territory.

While momentum showing “crazy strong” usually backs the trend, these wild numbers can also mean trader exhaustion is on the horizon. Hold your horses—a reversal might not be far off.

### The “Divergence” Trick

Here’s where it gets sexy: Divergence. If the price does one thing but the momentum indicator’s like, “eh, not impressed,” pay attention.

• Price makes a new high, but momentum doesn’t? Oof. Buyers are running out of steam. Watch for that trapdoor to drop.
• Price slumped to a new low, but momentum didn’t budge? Maybe sellers are losing the will to live. Could be the end of the slide.

Divergence is basically your early heads-up way before everybody else freaks out.

### Alright, But How Do You Actually Calculate This Thing?

You wanna get geeky? Here’s the formula, but honestly, your platform just does it for you:

$$
Momentum = \left( \frac{\text{Current Close}}{\text{Close from n periods ago}} \right) \times 100
$$

If the indicator spits out 110, you’re up 10% from n periods ago. If you see 90, well, 10% down. Simple math, wild implications.

### Got MT4? Here’s How To Add It

MT4 makes this a total no-brainer:

• Bang open Insert on the menu.
• Hit Indicators, slide down to Oscillators, click Momentum.
• Default setup is usually 14 (aka, looking back 14 periods), but tweak it if you’re feeling spicy or your asset acts wild.

### Why Even Bother with Momentum?

Because nobody wants to get faked out by lame trends. Momentum helps you spot if a trend’s for real or just running on fumes. It’ll also tell you if a reversal might be coming—super handy if you hate losing money (uh, who doesn’t?).

Honestly? If you trade off chart action, and you’re not using momentum—even just as a backup vibe-check—you’re kinda flying blind. This thing makes your trading smarter, your exits snappier, and saves you from a lot of facepalms. Stack it with other indicators, find that sweet spot, and boom—market ninja.