Chande Momentum Oscillator (CMO)
period = 14 (2–200) Overview
The Chande Momentum Oscillator (CMO), introduced by Tushar Chande in his 1994 book "The New Technical Trader," measures momentum by considering both upward and downward price movements equally. Unlike traditional momentum indicators that focus on closing prices alone, CMO calculates the difference between gains and losses over a period, providing a balanced view of market momentum that oscillates between -100 and +100.
The CMO's flexibility sets it apart - it doesn't just identify overbought or oversold conditions but helps traders understand subtle momentum shifts within larger trends. By separately summing positive and negative price changes before calculating their ratio, it captures pure price momentum while remaining responsive to directional changes, making it particularly valuable for traders seeking strong momentum signals in 2025's dynamic markets.
Interpretation & Trading Signals
Overbought/Oversold Strategy:
- Above +50: Overbought - asset nearing 100 suggests potential short setup
- Below -50: Oversold - extreme negative readings indicate potential bounce
- Trend Context: Many traders buy near overbought in strong trends (momentum continuation)
- Higher Timeframes: Use default settings on 4H+ charts where trends are clearer
Advanced Trading Strategies (2025):
- Zero Line Cross: CMO crossing above zero signals building momentum - buy or hold
- Signal Line: Add 10-period MA - cross above = bullish, cross below = bearish
- Trend Following: Only take oversold buys in bullish trends, overbought shorts in downtrends
- Strong Trends: Overbought/oversold less effective - trend trumps extremes
Divergence Trading:
- Bullish Divergence: Price makes lower low while CMO makes higher low - reversal up likely
- Bearish Divergence: Price makes higher high while CMO makes lower high - reversal down likely
- Out of Phase: Most important pattern when swings diverge from price swings
- Multi-Indicator: Always combine with other technical and trend analysis
Example Usage
Code examples will be available once the Rust implementation is complete.
Performance Analysis
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