LEARN MOMENTUM OSCILLATOR INDEX IN 3 MINUTES ——BLOCKCHAIN 101

What is Momentum Oscillator?

The core idea of Momentum can be summed up in one sentence: the faster price rises, the stronger the momentum; when the rise slows down, momentum weakens; when momentum reverses, price often reverses with it. It does not predict direction—it measures “momentum” itself. It’s like looking at a car: you’re not looking at whether the car is going left or right, you’re looking at—

• Is the car accelerating?

• Is the car braking?

And in trading, acceleration and braking are the earliest signals of changes in trend strength, which is why MOM is especially suitable for:

• judging trend strength

• finding overbought/oversold areas

• capturing momentum exhaustion at tops and bottoms

• digging out early signals before breakouts

• identifying fake breakouts and fake breakdowns

It is even “purer” than RSI and MACD, because it dresses nothing up—it only tells you: is momentum strong or not.

Momentum Oscillator uses a very simple speed logic:

MOM = current closing price − closing price n days ago

• MOM > 0 → bullish momentum

• MOM < 0 → bearish momentum

• MOM flattens → the market is decaying or waiting for direction

• MOM breaks out → a new trend starts

It’s like a “speedometer,” telling you:

• Has price accelerated?

• Has the rise slowed down?

• Is momentum about to reverse?

The logic of the MOM indicator is super simple

• MOM > 0: the market is in bullish momentum, bulls have the advantage

• MOM < 0: the market is in bearish momentum, bears have the advantage

• MOM rising: momentum strengthens, the trend accelerates

• MOM falling: momentum weakens, the trend decays

• MOM turns from negative to positive: a budding bullish signal

• MOM turns from positive to negative: a bearish dominance signal

But what is truly lethal is the “momentum turning point.”

Practical examples: understand MOM through real trading

1. Start with parameter settings

The most common MOM parameters are:

• MOM(10) → short-term trading: very sensitive, more noise, but suitable for swing / intraday trading.

• MOM(14) → neutral, universal: similar to RSI, and the most common default value.

• MOM(20 or 30) → trend trading: smoother fluctuations, suitable for identifying trend reversal points.

• If you like chasing trends → use a longer period

• If you like sprint-style trading → use a shorter period

2. Capture trend reversals (very useful)

Trend reversals do not rely on price itself, because price is always “half a beat slow,” but momentum always “walks ahead of price.”

• When an uptrend “can’t climb higher”: MOM will turn down first, and then price will start to pull back—this is one of the most reliable top exhaustion signals.

• When a downtrend “can’t fall further”: MOM will rebound first, and then price will bounce—this can be called a bottom-catching神器.

3. Overbought and oversold (more sensitive than RSI)

Although MOM has no fixed “overbought/oversold zones,” traders in practice will set it like this:

• upper zone → overbought strong-momentum zone

• lower zone → oversold strong-momentum zone

You can determine the upper and lower ranges based on: the average or standard deviation (more professional) of MOM over the past 30 days, or historical extreme values. MOM’s advantage is: it warns of momentum decay earlier than RSI.

4. Momentum early signals before breakouts

MOM is very sensitive to “warm-up before a breakout”:

• When price is ranging, but MOM starts rising → it indicates in advance that funds are quietly entering.

• When price is ranging, but MOM turns downward → a high probability of a fake breakout / breakout failure.

Whether in crypto or stocks, MOM can give you an early judgment of “directional strength.”

5. Divergence signals (the most valuable part of MOM)

Divergence is the core weapon of momentum indicators.

• Bullish divergence: price makes a new low, MOM does not make a new low, but instead moves upward—this indicates bearish momentum exhaustion, and the bottom may be coming.

• Bearish divergence: price makes a new high, MOM does not keep up, but instead moves downward—this indicates insufficient bullish momentum and extremely high top risk.

• divergence + volume = a stronger signal

• divergence + key support/resistance = a stronger reversal probability

Very useful practical combination strategies

1. Momentum + moving averages (a golden partner)

• MOM > 0 and above MA → bullish signal

• MOM < 0 and below MA → bearish signal

2. MOM + RSI (filter fake signals)

MOM gives direction early, RSI provides confirmation zones—this is very suitable for the “fake breakout” market in crypto.

3. MOM + MACD (capture the takeoff point)

MOM moves first → MACD confirms later, this combination is very robust.

4. MOM + trendlines (advanced play)

When MOM breaks its own trendline, it often happens earlier than a price trendline breakout!

Summary: MOM is the “sharpest momentum radar”

If RSI is a sentiment indicator, and MACD is a trend indicator, then:

MOM is a “driving force indicator.” What it tells you is:

• Is the market getting stronger?

• Or is it getting weaker?

• Is capital accelerating into the market?

• Or has the force already begun to exhaust?

In the crypto market, where sentiment is extreme and volatility is huge, MOM’s “lead time” advantage is exceptionally obvious. As long as you capture changes in momentum, you can see in advance what is about to happen to price.