So... "how can you determine whether the market will continue in the direction of the trendafter you enter, or if it will change direction right after you get in?" ...that's when we look at the momentum.
Generally, in trading the term MOMENTUM means price acceleration. Investopedia.com defines MOMENTUM as "the rate of acceleration of a securities price or volume"
The most obvious indicator for measuring momentum for many traders as the aptly named Momentum Indicator it's simply measures the amount that a market price has changed (often referred to as rate of change) over a given period of time, which you designate (14 bars is a common time period). Another way to express the momentum indicator is that it measures the current bars closing price to a specific number of previous closing prices (such as the closing prices of the last 14 bars) and gives a reading as to how fast price is moving in a direction.
Momentum measures the speed or strength of the markets movement, the price bars on chart can continue to move up (indicating uptrend), while the momentum indicatorcan move down if the speed (momentum) decreases. This shows that although the trend is still up, it's weakening and may soon be coming to an end...
Three common ways of using the momentum indicator to make sure a strong trend for entry and also to determine when a trend is weakening to exit a trade:
stay with an uptrend as long as the momentum indicator remains above 0, and exit the trade when the indicator drops back below 0
draw a trend line on the momentum indicator line and exit your trade when the trend line on the indicator is broken
exit your trend trade when you see divergence between price and the momentum indicator line. There's a higher high on the price and lower high on the indicator.
Check out my other post about momentum !https://steemit.com/blog/@krypto101/where-s-this-bus-going-chasing-momentum it will help you understand what's it all about ....
Also see my other posts from "Trading made Simple" series!!!
I hope you will find this useful and as always...Happy Trading !!!