This is a momentum oscillator calculated by the high/low/close of each bar price movement over a period of time.
When the short term momentum(green line) crosses above the long term momentum line(red)it indicates price is gaining momentum on upside and price may move up.
When the short term momentum(green line) crosses below the long term momentum line(red)it indicates price is gaining momentum on downside and price may go down.
When two lines are flat and converging (both lines are moving closer to each other) it shows momentum is fading out either side and price may go sideways until crossover happens.
Green line above 1 is considered to be overbought zone and below -1 is oversold zone. Look for divergences in these zone along with price action to get a probable price reversal.
When the short time line moves between -0.2 and +0.2, price generally stays in congestion mode
This indicator alone can't be used for buying or selling decision. This indicator can be used along with price action and confirmation to get an idea if is supporting the momentum or not..
Disclaimer: Backtest this indicator with price action over a period of time and understand how it works before taking any trading decision. The above points are derived based on my observation over a period of time. Trading in equity is always risky. Asses your risk profile and trade by managing proper risk.
1. The problem with previous version is that in rangebound day, it may generate whipsaws.
2. The updated version has single line with three colors:
a) Grey line - trend may change, wait until clear trend emerges. (I avoid trading when line is grey)
b) Blue line - uptrend. Slope is up - upside momentum is gaining strength. Slope is down - upside momentum is loosing strength
c) Red line - downtrend. Slope is down - downside momentum is gaining strength. Slope is up - downside momentum is loosing strength
3. Updated specifically for intraday.