Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Momentum

Momentum in markets is similar to momentum in physics. Markets in motion tend to stay in motion and markets at rest tend to stay at rest unless acted upon by an outside force. Price momentum indicators measure the speed and force of the trend.

For a quick explanation, consider a rubber ball tossed in the air. Its rate of ascent decreases even as it continues to rise. Market momentum readings can also fall as prices continue higher but sooner or later, the market, like the rubber ball, runs out of power and starts to come back down.

Indicators deserve their own chapters, but it is really not critical to learn detail at this point in your career. You will see charts of the relative strength index (RSI) or Stochastics later in this book, ...