100 * (sum of prices on up days - sum of prices on down days) : (sum of prices on up days + sum of prices on down days)
It is clear from the formula that this oscillator is similar to the momentum as well as the RSI.
Values above +50 form the overbought range, values below – 50 form the oversold range. A value of +50 would mean that the upward momentum is three times as large as the downward momentum, conversely, at a value of -50. The higher it is, the stronger the trend, fluctuations around the zero line indicate a sideways market. The crossing of the zero line can be evaluated as a trend indicator and used as a filter.
The CMO shows the best signals with regard to the extreme zones, reaching these values more often and more clearly. He gives less unclear signals in the middle range. As a momentum indicator, its signals also come quite early.
Since its signals come quite early, so it is a very fast indicator, it often hits small hooks before continuing in the direction of the trend. Chande recommended to combine the 20 CMO with a 9 MA. The crossovers should give the signals. In addition, divergence analyses are interesting and also formations in the indicator.
Non-Repainting Systems for MT4 and MT5
