How to read Momentum and Rate of Change indicators to find buy and sell signals in uptrends and downtrends?~/topic/24255/how-to-read-momentum-and-rate-of-change-indicators-to-find-buy-and-sell-signals-in-uptrends-and-downtrends/Copyright @ StockSharp Platform LLC 2010 - 20232023-02-08T02:55:22Zhttps://stocksharp.com/images/logo.pnghttps://stocksharp.com/posts/m/73085/Momentum 02.png M=P-Pn Momentum and Rate of Change. It is an indicator that measures the current...2022-12-28T14:42:06Z2023-01-13T17:53:57ZPannipahttps://stocksharp.com/users/164332/info@stocksharp.com<div align="center"><a href='https://stocksharp.com/file/136495/momentum-02_png/' class='lightview' data-lightview-options="skin: 'mac'" data-lightview-group='mixed'><img src="https://stocksharp.com/file/136495/momentum-02_png/?size=500x500" alt="Momentum 02.png" title="Momentum 02.png" /></a></div><br /><br /><b><div align="center">M=P-Pn</div></b><br /><br /><br /><span style="color:blue">Momentum</span> and <span style="color:blue">Rate of Change</span>. It is an <span style="color:blue">indicator</span> that measures the current price change. With prices in the last N days.<br /><br /><br /><b>provided that</b><br /><br /><ul><br /><li>P = current closing price<br /><br /><li>Pn = Closing price of n days before </ul><br /><br />And sometimes <span style="color:blue">momentum</span> may be measured by<br /><br /><div align="center"><a href='https://stocksharp.com/file/136496/rate-of-change-02_png/' class='lightview' data-lightview-options="skin: 'mac'" data-lightview-group='mixed'><img src="https://stocksharp.com/file/136496/rate-of-change-02_png/?size=500x500" alt="Rate of Change 02.png" title="Rate of Change 02.png" /></a></div><br /><br /><b><div align="center">R = P/Pn</div></b><br /><br />which in the latter case We call it a measure of <span style="color:blue">Rate of Change</span>, which is another measure of change. Because in fact We can prove that R is equal to 1 + M/Pn, that is, if we subtract R by 1, we get the percentage change in price, while M is a measure of price change. In other words, R is a measure of percentage change. Conversion of price plus 1 itself (confused? ), so some traders subtract 1 from the formula to calculate <span style="color:blue">Rate of Change</span> to become R* = P/Pn - 1 as well. In this case, it will measure the <span style="color:blue">Rate of Change</span> around 0 instead of measuring around 1.<br /><br /><br /><br />Some traders sometimes multiply R by 100 to get the actual percentage. Instead of the decimal point But everything is the same. In practice, <span style="color:blue">Rate of Change</span> (R) and <span style="color:blue">Momentum</span> (M) have very similar properties. And the readings are the same, only <span style="color:blue">Momentum</span> is measured from the zero line, but the <span style="color:blue">Rate of Change</span> is measured from the 1 line (or 100 if we are with 100).<br /><br /><br /><span style="color:blue">Momentum</span> lines built on small days Will be sensitive or susceptible to price changes. Than the line used longer time than which is smoother and less volatile If the price continues to move along the <span style="color:blue">Uptrend</span> and higher in the rate higher than the past, <span style="color:blue">Momentum</span> will continue to increase accordingly. But if the price increases at the same rate, the <span style="color:blue">Momentum</span> will move. In the side direction But if the price rises at a decreasing rate, <span style="color:blue">momentum</span> will weaken, so we can use <span style="color:blue">momentum</span> to “indicate price”. It is a measure of price acceleration and can guide prices.<br /><br /><br /><b><span style="color:blue">Momentum</span> Reading</b><br /><br />• If the price is rising and <span style="color:blue">Momentum</span> crosses above the zero line and is moving up as well, it confirms <span style="color:blue">Uptrend</span> (use lines 1 or 100 instead in case of <span style="color:blue">Rate of Change</span>).<br /><br />• If the price is going down, <span style="color:blue">Momentum</span> is falling and crosses the zero line as well. Will confirm <span style="color:blue">Downtrend</span>.<br /><br /><br />So a <span style="color:blue">buy signal</span> is generated when <span style="color:blue">Momentum</span> crosses the zero line and the price is in an <span style="color:blue">uptrend</span>. A <span style="color:blue">sell signal</span> is generated when <span style="color:blue">Momentum</span> crosses the zero line. And the price is in a <span style="color:blue">Downtrend</span> (likewise, use lines 1 or 100 instead of zero lines in case of <span style="color:blue">Rate of Change</span>)<br /><br /><div align="center"><a href='https://stocksharp.com/file/136499/momentum--rate-of-change-02_png/' class='lightview' data-lightview-options="skin: 'mac'" data-lightview-group='mixed'><img src="https://stocksharp.com/file/136499/momentum--rate-of-change-02_png/?size=500x500" alt="Momentum & Rate Of Change 02.png" title="Momentum & Rate Of Change 02.png" /></a></div><br /><br />An example of using <span style="color:blue">momentum</span> as an analytical tool. Can be considered from the example above The upper frame is the <span style="color:blue">momentum</span>, the bottom frame is the movement of the stock price and the moving average. The <span style="color:blue">buy signals</span> points appears is the point where the <span style="color:blue">momentum</span> is greater than 100 and is higher than the previous day. At the same time, the stock price is above the moving average as well (which should be significant. Or a better filter just comparing today's price with the previous day's price). On the other hand, it is where the <span style="color:blue">momentum</span> is less than 100 and lower than the day before. At the same time, the stock price is below the moving average, but the additional observation is that The profit received in each period will be more or less different. Because during period 1, there is quite an <span style="color:blue">uptrend</span>, there are a lot of <span style="color:blue">selling signals </span>points, observed from the 25-day ema line that has a positive slope. During the 2nd period, the slope of the 25-day ema line is less, but it is still <span style="color:blue">uptrend</span>. As for the 3rd period, the 25-day ema line is almost zero or fiat, so the profit during this period may not be worth it if considering the fees as well.Copyright @ StockSharp Platform LLC 2010 - 2023