It measures the amount of change in commodity’s price during a period of time.
Momentum indicators presume that the current tendency will continue. So, if the indicator reaches the extremely high values and then turns downwards, the coming price increasing should be expected. But, in any case, one should not open/close position before the prices confirm the signal of the indicator.
Momentum line goes long when:
Momentum crosses to below the oversold level and then rises back above it; or on bullish divergences - where the first trough is below the oversold level.
Momentum line goes short when:
Momentum crosses to above the overbought level and then falls back below it; or on a bearish divergence with the first peak above the overbought level.
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