Description:
The Chande Momentum Oscillator (CMO) is a technical momentum indicator developed by Tushar Chande in his 1994 book, “The New Technical Trader.” It is designed to identify overbought and oversold conditions in the market, helping traders determine potential entry and exit points for their trades.
Input Parameters:
- Length: Number of periods used in calculation.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Buy and Sell Signals: Traders can use the CMO to generate buy and sell signals. A buy signal occurs when the CMO crosses above a lower threshold (e.g., -50 or -30), indicating that the asset is moving from an oversold to a neutral or bullish territory. A sell signal occurs when the CMO crosses below an upper threshold (e.g., +50 or +30), suggesting that the asset is transitioning from an overbought to a neutral or bearish territory.
- Overbought and Oversold Conditions: Generally, a CMO value above +50 indicates an overbought condition, suggesting the asset may be due for a price correction. Conversely, a CMO value below -50 indicates an oversold condition, implying that the asset may be undervalued and due for a price rebound.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.
May 10, 2024