Momentum Phases

📌 Overview

The Momentum Phases indicator helps traders quickly identify periods of strong bullish or bearish momentum based on the relationship between a short‑term and a long‑term Moving Average (SMA).

It helps traders visually distinguish between Positive 🟢, Negative 🔴, and Neutral ⚪ phases by plotting a dynamically colored state line and generating optional alerts when a phase change occurs.

🧠 How It Works

⦿ SMA Calculation

• The indicator calculates two SMAs:
  
• Short SMA (default: 7 periods)
  
• Long SMA (default: 65 periods)
  
• Both SMA lengths can be adjusted by the user.
  

// SMA calculations
smaShort = ta.sma(close, shortLen)
smaLong = ta.sma(close, longLen)

⦿ Momentum Ratio

• A ratio is calculated:
  

ratio = smaShort / smaLong

• This ratio measures how far the short‑term trend has diverged from the long‑term trend.
  

⦿ Threshold Levels

• Positive Threshold (default: 1.05) — indicates short SMA is at least 5% above the long SMA.
  
• Negative Threshold (default: 0.95) — indicates short SMA is at least 5% below the long SMA.
  
• These thresholds are user‑adjustable.
  

⦿ Momentum States

• Positive Momentum: Ratio ≥ Positive Threshold (default: 1.05) → Short SMA is at least 5% above Long SMA.
  
• Negative Momentum: Ratio ≤ Negative Threshold (default: 0.95) → Short SMA is at least 5% below Long SMA.
  
• Neutral: Ratio between the two thresholds.
  

⦿ State Line Plot

• The indicator plots a flat state line at 1.0 when in positive or negative momentum, and 0.0 when in neutral.
  
• The state line’s color changes dynamically:
  
• Green 🟢 Positive Momentum: Ratio ≥ Positive Threshold (default: 1.05) – Short SMA is at least 5% above Long SMA.
  
• Red 🔴 Negative Momentum: Ratio ≤ Negative Threshold (default: 0.95) – Short SMA is at least 5% below Long SMA.
  
• Gray ⚪ Neutral: Ratio between the two thresholds.
  

📈 How to Use

• Trend Confirmation: Use the state line color to quickly confirm the prevailing momentum.
  
• Green 🟢: Consider focusing on long setups
  
• Red 🔴: Consider focusing on short setups
  
• Gray ⚪: Consider staying neutral or waiting for stronger signals
  
• Trade Filtering: Filter trades in your existing strategy so they only align with the detected momentum phase.
  
• Early Warnings: Enable phase change alerts to get notified when market conditions shift.
  

⚙️ Customization

• SMA Periods: Adjust short and long SMA lengths to suit your trading timeframe.
  
• Thresholds: Tighten (closer to 1.00) for more frequent signals, or widen for fewer but stronger signals.
  

🔔 Alerts

• 🟢 Positive Momentum START – Stock/Security shifts into positive momentum.
  
• ⚪ Positive Momentum END – Positive momentum ends (neutral state).
  
• 🔴 Negative Momentum START – Market shifts into negative momentum.
  
• ⚪ Negative Momentum END – Negative momentum ends (neutral state).
  
• Momentum Phase Change – Any shift between Positive, Negative, or Neutral.
  

🎯 Add this indicator to your chart to track momentum phases like a pro — know exactly when trends start, end, or stall.