Momentum Indicators

Momentum indicators are useful for determining the rate at which the price of the underlying security changes. These indicators plot the rate of price change rather than the price change itself and are usually leading, oscillating indicators. Some of these indicators, such as the Stochastic Oscillator and the Relative Strength Index (RSI), have an upper and lower boundary (usually 100 and -100) while others, such as the Commodity Channel Index (CCI) and the MACD, are unbounded. In the case of the latter, extreme reading over a relatively long period of time may be used to determine where the overbought and oversold areas are located.

The other popular momentum indicators include the Chande Momentum Oscillator (CMO), Mass Index, Momentum Indicator (MTM), Relative Momentum Index, Stochastic Momentum Index, TRIX, and Williams' %R.