Momentum is an oscillator-type indicator used to interpret overbought/oversold markets. It assists in determining the pace at which price is rising or falling. This indicates whether a current trend is gaining or losing momentum, whether or not it is overbought or oversold, and whether the trend is slowing down.

Momentum is calculated by computing the continuous difference between prices at fixed intervals. That difference is either a positive or negative value, which is plotted around a zero line. When momentum is above the zero line and rising, prices are increasing at an increasing rate. If momentum is above the zero line but is declining, prices are still increasing but at a decreasing rate. The opposite is true when momentum falls below the zero line. If momentum is falling and is below the zero line, prices are decreasing at an increasing rate. With momentum below the zero line and rising, prices are still declining but at a decreasing rate.

This indicator is described in more details in the Steve Achelis' book "Technical Analysis from A to Z".

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