By measuring the amount that a security's price has changed over a given time span, the Momentum indicator provides an indication of a market's velocity and to some degree, a measure of the extent to which a trend still holds true. It can also be helpful in spotting likely reversal points.

While the mathematics are straightforward (subtract the closing price n days ago from the closing price today), do not underrate its value because of its simplicity.

Use the Momentum indicator as a trend-following oscillator similar to the MACD and buy when the indicator bottoms and turns up. Sell when the indicator peaks and turns down. When the Momentum indicator reaches extremely high or low values (relative to historical values) assume a continuation of the current trend.

A second usage for the Momentum indicator is as a leading indicator. As a market peaks, the Momentum indicator will climb sharply before falling off. At a market bottom, the plot will drop sharply and then climb well ahead of prices.

Information provided by Charles LeBeau's Technical Traders Guide to Computer Analysis of the Futures Market.