Momentum, also referred to as MOM, is an important measure of speed and magnitude of price moves. This is often a key indicator of trend/breakout-based trading algorithms.

In its simplest form, momentum is simply the difference between the current price and price of some fixed time periods in the past. Consecutive periods of positive momentum values indicate an uptrend; conversely, if momentum is consecutively negative, that indicates a downtrend. Often, we use simple/exponential moving averages of the MOM indicator, as shown here, to detect sustained trends:

Here, the following applies:

• : Price at time t
• : Price n time periods before time t