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Dan:
One way to approach your question is to talk about
what price does as a function of time. First of all, there is an absolute
change in price, which might be discussed in a variety of ways, including, for
example, Fibonacci levels. Second, there is a change in price per unit of
time. If you think of price change as distance, then the change in
price/time is velocity. Velocity (from the old physics books) is a vector,
which is a line that is defined by direction, distance, and time. Any
line on your chart (e.g., trendline, Gann line, etc.) is a vector that gives
information about the price change in a certain direction over time, which in
turn defines a trend. Looking at how velocity changes per unit of time is
momentum or acceleration, which is reflected by indicators such as MACD,
stochastics, etc.
If you have a little calculus
background, velocity and acceleration are the 1st and 2nd derivative of
price with respect to time. The importance of this is that
velocity turns before price, and acceleration before velocity. As an
example, if price is a sine curve, the 1st derivative is a cosine curve and
the 2nd a -sine curve. The chart below shows the three curves
with velocity and acceleration running 1/4 and 1/2 cycle ahead of the price
plot.
Bill
----- Original Message -----
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Dan
Harels
To: <A title=metastock@xxxxxxxxxxxxx
href="mailto:metastock@xxxxxxxxxxxxx";>metastock@xxxxxxxxxxxxx
Sent: Monday, February 04, 2002 12:34
PM
Subject: Re: momentum indicators, using
also o-h-l
Rudolf,I am not sure I understand the difference
between momentum and trend. Please
explain.Dan
Attachment:
Description: "Price, Velocity, Acceleration.gif"
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