Traders are obviously interested in prices and how they change over time, but they are equally interested in measuring how fast prices are changing – the momentum of the market. Is the velocity of a price trend increasing or diminishing? Does this measurement suggest anything about future price direction?

Momentum is simply the difference between prices over some period of time. What distance does price cover in what amount of time? A price at any given moment – $1,700 an ounce for gold, for example – is just one price and doesn’t indicate whether prices are moving up or down. If the price rises $10 in one day, a trader now has a distance and a time to compare with previous price movements and arrive at a momentum value.

Several indicators gauge the momentum of a market. A moving average is one simple measure, indicating the trend or slope of price movement. Changes in the steepness of the slope represent degrees of price momentum.

Putting moving averages of different lengths together, as with the Moving Average Convergence-Divergence (MACD) indicator covered in the section on trend-following indicators, provides several types of trading signals, based on the premise that the shorter moving average will tend to fluctuate more quickly and dramatically than the longer moving average.

The momentum indicators can be placed into two categories – the open-ended ones that do not have a limit on how far they might move up or down and the closed-end indicators that have some type of threshold that limits how far they can move.

This section will discuss the open-ended indicators below while the closed-end indicators, often called oscillators, will be covered in a separate section.

Momentum indicator (MOM), which compares how the current price compares with a price a selected number of period ago, expressed as a price difference.

Rate of Change (ROC), which also compares how the current price compares with a price a selected number of period ago but is expressed as a percentage.