Before adding and committing to a new charting tool, take a look at the tool on a demo account and understand how it works. Be sure to set the data points accordingly and test it out with your current investing or trading strategy. There are many different momentum indicators out there so take a look at many and then settle on one or none. Consulting a forum or completing more research will certainly help you learn and find ways to maximize these tools.
Momentum
 | By Nathan Young | Macroaxis Story |
When you look at a chart, you simply see candles or a line chart that gives you data points on price of the stock for your chosen time frame. The information alone is very limited in what it can tell the viewer. People see stock go up, down, and sideways, but they are limited as what the behind the scenes are stating. Momentum is a data point that can really put some perspective on a chart and allow you to get a better painted picture of what the equity can do. Momentum simply tells you how much buying or selling pressures are behind a move and how much volume is there.
Updated over a year ago View currently updated edicational stories | Filter Momentum |
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Reviewed by Gabriel Shpitalnik
First, let us use an example of the equity of your choosing, and it is going to the upside. When the chart alone is presented, all you see is a stock increasing with no context. You have no idea how much farther the stock may go or what is driving the movement or how many people are driving the movement. When you add in momentum, you can really get a sense of how much further the stock may have to run or if it is running on low momentum which could indicate a pull back soon. The same idea can be applied to a stock that is selling off.
When you check out a chart, there are many different momentum indicators that allow you to gauge momentum and see where the price is going. They are customizable and allow you to encompass a various amount of time ranges and data points. Usually they run from 0 to 100 and anything below 20 means the stock is potentially oversold and anything above 80 could indicate a potentially over bought stock. A few indicators you can look at to add in your charting are the MACD or Moving Average Convergence/Divergence, MFI or the Money Flow Index, or the STOCH, which indicates the Stochastic.
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