Today's article is all about Chande momentum oscillator indicator.
This is the fourth article about the technical indicators. If this is a new topic for you, some concepts and definitions are disclosed in the first article of the series - Simple Moving Averageе.
As you can seem, I've started with a description of all kinds of moving averages. And here we have a momentum indicator. But that's not because we run out of moving averages, but because out next moving average indicator is variable moving average and it's based on Chande momentum oscillator indicator so I have to start from it.
It was invented by Tushar Chande.
Here is it's idea - the price movement is calculated for a given number of periods n.That is, the difference is taken for two adjacent candles, e.g. close price of the last and next-to-last candles. If the difference is positive - the price goes up, it is added on to the total positive difference, if the difference is negative - the price goes down, it is added on to the total negative difference.
The value of the indicator is calculated as a fraction, wherein the difference of the resulting positive and negative differences is the numerator and their sum multiplied by 100% is the denominator.
It's probably may be written like this
This indicator has a range from -100 to +100. The security is deemed to be overbought when the momentum oscillator is above +50 and oversold when it is below -50.
It's laid off on a separate scale, so the two following graphs are candles and, in fact, indicator.
There is, however, a little problem with the fact that they have a separate navigation that's why you have to switch to the last values two times - first switch candles, then indicator, but such is our current level of technological development.
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