• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Daniels Trading

Independent. Objective. Reliable.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Careers
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Hedging Videos
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • The Swine Times
      • Technical Ag Knowledge
      • This Week in Grain
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
    • Webinars
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • GAIN Capital Futures
    • StoneX
  • Contact
Home / Education / Technical Analysis Learning Center / Momentum

Momentum

Momentum is currently one of the most used technical studies. It is an oscillator-type study used to interpret overbought/oversold markets. It assists in determining the pace at which price is rising or falling. This indicates whether a current trend is gaining or losing momentum, whether or not it is overbought or oversold, and whether the trend is slowing down.

Momentum can be calculated by dividing today’s price (identified by Field) by the closing price ‘n’ bars ago and then multiplying the quotient by 100.

Download our free guide, Futures Trading: Technical Analysis for Beginners,  today!

Properties

Number of Bars: The number of bars back on which to base the calculation. If the chart displays daily data, then number of bars denotes days; in weekly charts, the number of bars will stand for weeks, and so on. The application uses a default of 10.

Aspect: The Symbol field on which the study will be calculated. Field is set to “Default”, which, when viewing a chart for a specific symbol, is the same as “Close”.

Interpretation

Momentum is calculated by computing the continuous difference between prices at fixed intervals. That difference is either a positive or negative value, which is plotted around a zero line. When momentum is above the zero line and rising, prices are increasing at an increasing rate. If momentum is above the zero line but is declining, prices are still increasing but at a decreasing rate.

The opposite is true when momentum falls below the zero line. If momentum is falling and is below the zero line, prices are decreasing at an increasing rate. With momentum below the zero line and rising, prices are still declining but at a decreasing rate.

The normal trading rule is simple. Buy when the momentum line crosses from below the zero line to above. Sell when the momentum line crosses from above the zero line to below. Another possibility is to establish bands at each extreme of the momentum line. Initiate or change positions when the study enters either of those zones. You could modify that rule to enter a position only when the study reaches the overbought or oversold zone and then exits that zone.

You specify the length of the momentum study. You must determine a value suitable to your trading needs and methods. Some technicians argue the length of the momentum study should equal the normal price cycle. The best method is to experiment with different lengths until you find the length that works best for that particular commodity you are trading.

Literature

Lebeau, Charles, and Lucas, David. Technical Trader’s Guide to Computer Analysis of the Futures Market. Homewood, IL: Business One Irwin. 1991.

Murphy, John J. The Visual Investor. New York, NY: John Wiley & Sons, Inc. 1996.

Colby, Robert F., Myers, Thomas A. The Encyclopedia of Technical Market Indicators. Dow Jones – Irwin. Homewood, IL. 1988.

Kaufman, Perry J. The New Commodity Trading System and Methods. 1987.

Pring, Martin J. On Market Momentum. 1993.

Pring, Martin J. Technical Analysis Explained.

Babcock, Bruce. The Dow Jones – Irwing Guide to Trading Systems. 1989.

Murphy, John J. Technical Analysis of the Futures Markets. New York Institute of Finance. Englewood Cliffs, NJ. 1986.

Wilder, J. Welles. New Concepts in Technical Trading Systems. Greensboro, NC: Trend Research, 1978.

Content Source: FutureSource

Read our guide, Futures Trading: Technical Analysis for Beginners

View Other Technical Analysis Studies

  • Bollinger Bands
  • Commodity Channel Index
  • Crack Spread
  • Crush Spread
  • Default
  • Directional Movement Index
  • Envelope
  • Exponential Moving Average
  • Exponential Oscillator
  • High Low Moving Average
  • Highest High / Lowest Low
  • Historic Volatility
  • Keltner Channel
  • Least Squares Linear Regression
  • Line Oscillator
  • Moving Average
  • Moving Average Convergence Divergence
  • Moving Standard Deviation
  • Open Interest
  • Oscillator
  • Parabolic Stop and Reversal
  • Rate of Change
  • Relative Strength Index
  • Slow Stochastic
  • Smoothed Moving Average
  • Smoothed Oscillator
  • Stochastic
  • Variable Moving Average
  • Volume
  • Volume and Open Interest
  • Weighted Close
  • Williams’ %R

Primary Sidebar

Tips & Strategies

Trading Functionality

Keys to Becoming a Successful Scalp Trader

Scalping is a trading strategy designed to harvest small gains repeatedly to secure long-run profitability. Markets that feature consistent liquidity and volatility are ideal for implementing scalping strategies. As a result, scalpers commonly target such futures products as WTI crude oil, the E-mini S&P 500, and gold. Although benefits like limited risk and regular cash… Read more.

How to Choose a Currency Cross

Trading foreign exchange markets can often feel like picking a winner at the Masters: you try to execute on a general opinion only to be met with a whole mess of choices.

Trailing Stop Loss

Maximize Your Profits with a Trailing Stop Loss

For active futures traders and investors, the trailing stop loss is a valuable tool for optimizing profitability. Featuring dynamic functionality, these types of orders complement a wide variety of trading strategies. Let’s take a deep dive into trailing stops and explore how they can help you maximize your potential in the marketplace. Trailing Stops: Functionality… Read more.

More Tips & Strategies

  • Using Futures and Options to Protect Your Portfolio from Systematic Risk
  • The Anti-Outlier Trade
  • What Is Implied Volatility?
  • Top Tips for Trading Candlestick Patterns
  • Do You Even Pairs Trade?
  • When Should You Use a Trailing Stop Loss Strategy?
Trustpilot

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

Daniels Trading
100 South Wacker Drive, Suite 1225
Chicago, IL 60606
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot

Copyright © 2021 · Daniels Trading. All rights reserved.

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top