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The Momentum LE and Momentum SE strategies are “velocity” indicators. They ignore complex averages and simply measure how fast the price is moving compared to where it was a set number of bars ago.

How Logic Works

Momentum is calculated by subtracting the price N bars ago from the current price.

1. Momentum (Long Entry)

• The Condition: The strategy looks for the Momentum value to cross above zero (or a user-defined threshold).
• The Entry Signal: Triggered when the current price is significantly higher than the price from the specified Length ago.
• The Goal: To enter when the “speed” of the market is accelerating upward.

2. Momentum (Short Entry)

• The Condition: The strategy looks for the Momentum value to cross below zero.
• The Entry Signal: Triggered when the current price is significantly lower than the price from the specified Length ago.
• The Goal: To short the market as downward velocity increases.

Key Customizable Inputs

• Price (Default: Close): The data point used for the calculation.
• Length (Default: 12): The look-back period. A shorter length makes the strategy very sensitive to small price changes, while a longer length focuses on major shifts.

Strategic Considerations

• The “Runaway” Market: Momentum strategies excel in “parabolic” markets where prices move fast and far.
• Mean Reversion Risk: The biggest danger for this strategy is a “sideways” or “range-bound” market. In these conditions, by the time the momentum registers as “strong,” the move may already be over, leading to a “buy high, sell low” scenario.
• Exit Timing: Because momentum can evaporate quickly, these strategies often require tight trailing stops to protect gains before the market settles back into an average range.