Chande Forecast Oscillator (CFO)

Parameters: period = 14 (2–200)

Overview

The Chande Forecast Oscillator (CFO), developed by prominent technical analyst Dr. Tushar Chande, offers a comprehensive view of market trends by comparing actual closing prices to statistically forecasted prices based on linear regression. This unique approach plots the percentage difference between where price is and where it "should" be according to its recent trend, helping traders identify when markets have moved too far too fast.

The CFO's power lies in its ability to glimpse into the future using mathematical projections. By measuring how far current prices deviate from their regression-based forecast, it identifies unsustainable market conditions before traditional indicators. The oscillator is above zero when prices exceed the forecast (bullish momentum) and below zero when they fall short (bearish momentum), providing clear directional signals.

Interpretation & Trading Signals

Zero-Line Crossover Strategy:

  • Buy Signal: CFO crosses above zero - price gaining upward momentum
  • Sell Signal: CFO crosses below zero - potential downward momentum
  • Trend Confirmation: CFO above zero and rising reinforces uptrend continuation
  • Best Timeframes: Most effective on 4-hour or daily charts in trending markets

Mean Reversion Trading (2025):

  • Overbought Signal: CFO reaches significantly high positive values - price correction likely
  • Oversold Signal: CFO drops to extreme negative values - potential rebound setup
  • Entry Rule: Trade back toward the regression line when CFO shows extremes
  • Support/Resistance: Combine CFO readings with key levels for confirmation

Divergence Strategies:

  • Bearish Divergence: Price makes higher highs while CFO forms lower highs - momentum waning
  • Bullish Reversal: CFO rises while price still falling - downtrend weakening
  • Period Adjustment: Shorter periods increase sensitivity; longer periods reduce false signals
  • Multi-Indicator: Never use CFO alone - combine with other technical and fundamental analysis

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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