Momentum

What is momentum?

In technical analysis, momentum is the relative change in price over a specific time interval. Momentum is often equated with speed or velocity and considered in terms of relative strength. (Source: CFTC)

Momentum and rate of change (ROC) are simple technical analysis indicators showing the difference between today's closing price and the close N days ago.

"Momentum" in general refers to prices continuing to trend. The momentum and ROC indicators show that by remaining positive while an uptrend is sustained, or negative while a downtrend is sustained.

A crossing up through zero may be used as a signal to buy, or a crossing down through zero as a signal to sell. How high (or how low when negative) the indicators get shows how strong the trend is.

One can choose between looking at a move in dollar terms or proportional terms (price change in dollars vs. price change in percent from beginning of the trend). The zero crossings are the same in each, of course, but the highs or lows showing strength are on the respective different bases. (Source: Wikipedia)