What's the difference between momentum and convergence indicator?
Momentum is calculated by looking at the data today, and comparing it to data some time ago. For instance, to calculate momentum for market net flow, we simply take the current market net flow and subtract it from the market net flow some time ago e.g 60 minutes ago. Momentum can be used to gauge the change in a trend.
On the other hand, convergence is calculated by looking at whether the stock price and options flow are both showing the same sentiment. If yes, convergence is positive, if not, convergence is negative. When convergence is negative i.e a divergence, it lets us know that the sentiment shown by options flow is not fully being surfaced in the stock price, which can be a good time to stay out of positions if one is following options flow. Some people do actually play divergences i.e they wait when flow and stock price diverge, and go in expecting the divergence to minimize.
