In This Chapter
Figuring out what momentum means in trading
Going over the math and using momentum
Getting to know the relative strength index (RSI)
Introducing the stochastic oscillator
Momentum is the strength of the speed of a moving object. In this case, the “object” is the price of a security. Momentum is also a generic term covering a number of technical indicators, although many momentum indicators don’t use the word momentum in their names. In this chapter, I introduce you to some momentum indicators and give you tips on how to use them.
The terms momentum and rate of change are used interchangeably in technical analysis. The indicators look almost identical on a chart. Unless you plan to write formulas, the tiny differences don’t affect your analysis. I use the general term momentum throughout this chapter because it’s easier.