Chande momentum oscillator indicator

Description of Chande momentum oscillator indicator, drawing a graph on candles

khajit_94

Created: 2016-02-08 19:54:09, Last updated: 2021-03-20 19:27:23

Today's article is all about the 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 Average.

Other articles -
Weighted moving average

Exponential Moving Average

As you can see, 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 our next moving average indicator is a variable moving average. It's based on the Chande momentum oscillator indicator, so I have to start from it.

It was invented by Tushar Chande.

Here is its idea - the price movement is calculated for a given number of periods n. The difference is taken for two adjacent candles, e.g., the 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. The difference of the resulting positive and negative differences in the numerator and their sum multiplied by 100% is the denominator.

It's probably maybe written like this

$CMO_n={100\%}\frac{\sum_{i=2}^n{\text{positive movement}} - \sum_{i=2}^n{\text{negative movement}}}{\sum_{i=2}^n{\text{positive movement}} + \sum_{i=2}^n{\text{negative movement}}}$,

where
$\text{positive movement}=\begin{cases} close_i-close_{i-1},& close_i>close_{i-1} \\ 0,& close_i<close_{i-1} \end{cases}$
$\text{negative movement}=\begin{cases} close_{i-1}-close_i,& close_i<close_{i-1} \\ 0,& close_i>close_{i-1} \end{cases}$

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 below -50.

It's laid off on a separate scale, so the two following graphs are candles and, in fact, an indicator.

There is, however, a little problem with the fact that they have 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.

Chande momentum oscillator

Digits after the decimal point: 2
Moving average
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Moving average
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Candles for USDJPY

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