## What Is Momentum?

**Momentum** is one of the simplest indicators in **technical analysis**. Its main role and advantage is simplifying the information about **strength and speed of change** over a defined time period.

Momentum shows you how much a particular variable (such as a stock’s closing price) has changed recently. By comparing the current Momentum’s value to its values in the past, you can see how strong the current market’s trend is.

## Closing Price Momentum Formula

The most commonly used version of Momentum in technical analysis is **Price Momentum** – Momentum of closing prices. Its **calculation** is very simple. The only **parameter** you need is the period (or length) of the Momentum – let’s call it N.

**Momentum is calculated as the difference between current bar’s closing price and the closing price of the bar N bars ago:**

**Momentum = Close – Close.N**- Close = current bar’s closing price
- Close.N = closing price of the bar N bars ago

## Momentum Is an Oscillator

It is evident from the Momentum equation above that Price Momentum:

- can reach either positive or negative values,
- oscillates around zero, and
- is measured in price units.

Price Momentum is an **oscillator**. Like Stochastics, RSI, or %R, **Momentum** **oscillates around zero**. However, unlike these three indicators (and similarly to MACD), it is not measured in percent and doesn’t only reach values from -100 to 100 or from 0 to 100. In general, **Momentum is measured in the same units** as the underlying variable. Price Momentum is measured in price units.

## Examples of Momentum Values

Theoretically, **Momentum can reach values from negative infinite to positive infinite**.

If a stock has fallen from 54 to 41 in the last 20 days, the 20-day Momentum is -13.

If a stock’s closing price was 10 dollars 20 days ago and the current closing price is 120,351 dollars, the 20-day Momentum would be 120,341 (dollars).

## Using the Momentum Indicator with Other Variables

The use of **Momentum** is not limited to closing prices. You can apply Momentum to other variables in **technical analysis**, like moving averages, volume, or other indicators. In **fundamental analysis**, a company’s **earnings momentum** is commonly measured and used for finding growth stocks. You can also apply Momentum to **macroeconomic variables** like public debt, house prices, or unemployment rate.

The calculation of momentum in all these applications always follows the same logic: you subtract the value of the particular variable N bars (or days, months, years) ago from the current value.