Momentum (Rate-Of-Change/ROC)

Definition:

Momentum is a relatively straightforward indicator that measures the rate of change in price as opposed to price itself. It is calculated by subtracting the price of x periods ago from the price now. This indicator can also be referred to as rate-of-change (ROC).

To reduce the choppiness of the indicator, the value given in IQ Chart is a five-period exponential moving average of itself.

Interpretation:

The conventional interpretation is to use momentum as a trend-following indicator. This means that when the indicator peaks and begins to descend, it can be considered a sell signal. The opposite conditions can be interpreted when the indicator bottoms out and begins to rise.