I was just reading through the following page, on divergence trading: Divergence Trading | Trading Divergences | High School
From what I gather, this article claims that any oscillator should be representative of momentum in a market. Assuming that this is correct, why would it be the case? For example, why would a stochastic represent momentum?
Also, what exactly does momentum mean, in this context? Does it mean the same thing as momentum in physics/mechanics? The force with which price is moving?
You need to look up what momentum means and commit it to memory. Every trade has or doesn’t have momentum at some point. Stochastics displays when market is over bought or over sold. Again if you don’t know what that means you need to look it up. You’ll get a lot further ahead if you learn how to fish instead of trying to get someone else who has done the work to give you one.
“Developed by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum indicator that shows the location of the close relative to the high-low range over a set number of periods. According to an interview with Lane, the Stochastic Oscillator “doesn’t follow price, it doesn’t follow volume or anything like that. It follows the speed or the momentum of price. As a rule, the momentum changes direction before price.” As such, bullish and bearish divergences in the Stochastic Oscillator can be used to foreshadow reversals. This was the first, and most important, signal that Lane identified. Lane also used this oscillator to identify bull and bear set-ups to anticipate a future reversal. Because the Stochastic Oscillator is range bound, is also useful for identifying overbought and oversold levels.”