Momentum indicator is one of the frequently used indicators in
Technical Analysis. But it has one "issue": it is a very "nervous"
indicator - the values it displays are far from being smooth, and that
can cause a lot of false signals in a lot of cases - regardless of the
calculation period that is used.
This indicator is one of the possible ways to solve that issue. The
smoothing is not done by smoothing the momentum value, but the
calculation itself is changed completely. Even with a completely changed
calculation method, the values are, as it can be seen by comparing it
to "regular" momentum, a real momentum indicator except that the values
are much, much smoother and that makes the number of false signals
insignificant compared to regular momentum.
PS: just a quick example and a comparison of the smoother momentum and the "regular" momentum:
As it can be observed, there is no lag compared to "regular" momentum
of the same period quite the opposite: in some cases the smoother
momentum is leading compared to regular momentum, and the values of the
smoothed momentum are (as its name tells us) much, much smoother.
Author: Mladen Rakic