What are momentum indicators?

Momentum indicators are technical analysis tools that are used to measure the strength or speed of price changes in a security or market. These indicators are based on the premise that prices tend to move in the same direction as the underlying momentum and that significant changes in momentum may be an early warning of a trend reversal.

There are several types of momentum indicators, including the following:

Relative strength index (RSI): The RSI is a popular momentum indicator that measures the speed and strength of price changes. It compares the magnitude of recent gains to recent losses to determine whether a security is overbought or oversold.


Moving average convergence divergence (MACD): The MACD is a momentum indicator that uses two exponential moving averages to identify trend changes and potential trade signals.


Stochastic oscillator: The stochastic oscillator is a momentum indicator that compares the current price of a security to its price range over a set period of time to identify potential overbought or oversold conditions.


Williams %R: Williams %R is a momentum indicator that compares the current closing price of a security to its high and low range over a set period of time to identify potential overbought or oversold conditions.

Momentum indicators are commonly used to confirm trend signals and identify potential trade opportunities. They can be used on their own or in combination with other technical analysis tools to provide a more complete picture of market