TL;DR. Price now minus price n bars ago. Above zero the market is higher than it was, below zero it is lower, and the size is the move in points.
What it measures
- The raw move over n bars. No scaling and no smoothing: a Momentum of 12 on ES means 12 points higher than n bars back.
- Speed. A rising line means each new bar adds more than the bar leaving the window took away.
- Price units. Unlike RSI or ROC, the reading grows with the instrument's price and volatility, so thresholds are per instrument.
Formula
Inputs in AlgoLift
| Setting | Default | Range | Notes |
|---|---|---|---|
| Period | 10 | 1 to 500 | How many bars back today's value is compared with. |
| Source | Close | Close, Open, High, Low, HL2, HLC3, OHLC4 | Which value of each bar is compared. |
Outputs in AlgoLift
| Handle | Type | Plotted | Notes |
|---|---|---|---|
| Momentum | Numeric | Always | The value minus the value n bars ago, in price units, drawn in its own panel around zero. |
How to read it
- Above zero and rising: price is higher than n bars ago and the gap is widening.
- Above zero and falling: still higher, but the move is losing speed. Often the first sign of a stall.
- Crossing zero: price is back at its level of n bars ago.
- Against price: a new price high with a lower Momentum high is a divergence, a move made on less speed.
Best in, worst in
Best in trending sessions, where the sign of the line tells you which side to trade.
Worst in ranges, where the line crosses zero over and over. Filter with a trend measure before acting on a cross.
Three setups
1. Zero-line direction filter
A Comparison that Momentum(20) is above 0 gates every long; below 0 gates every short. AND it into another entry trigger.
2. Momentum turn
A Crossover of Momentum(10) above 0 enters long, below 0 enters short. Pair it with a Set Stop Loss sized in ATR.
3. Fading speed exit
Exit a long with Set Exit Condition when Momentum(10) falls below its own value 3 bars ago (through a Bars Ago modifier): the move is still up but slowing.
Common mistakes
- Copying a threshold between instruments. A Momentum of 10 is a small move on NQ and a large one on a 50-dollar stock. Use ROC when the rule must port.
- Ignoring the bar leaving the window. The line moves when an old bar drops out, not only when a new one arrives. A spike n bars ago causes a jump today.
- Over-fitting the period. Sweep a range and look for a plateau (overfitting in trading).
Momentum is the move over n bars in points: the plainest speed reading there is, and the one that ties most directly to stops and targets.