Chande Momentum Oscillator( CMO):How to analyze financial market using chande momentum oscillator indicator

Chande Momentum Oscillator( CMO):How to analyze financial market using chande momentum oscillator indicator

By QuintoTrader | Quinto Trader | 30 Sep 2019


Chande Momentum Oscillator is a kind of an oscillator indicator.

Being an oscillator indicator, Chande Momentum oscillator was created by Tushar Chande with the main objective of capturing the Momentum of different trading securities thus helping traders to know whether the market is in an overbought or oversold position as well as in divergence movement.

Just like other oscillators, Chande Momentum oscillator also has an oscillation at point 0 ranging from -100 to 100 thus it works on the basis of overbought and oversold as well as divergence.

 

According to Tushar Chande,Chande momentum oscillator values are gotten by using the following formulae;


Chande momentum oscillator = (Sum of higher closes price over a given period-sum of lower closes price over a given period)/(Sum of higher closes price over a given period+sum of lower closes price over a given period)

 

Concept of overbought and oversold

Since chande momentum oscillator is based on overbought and oversold and it has an oscillation at point 0 ranging from -100 to 100,it therefore follows that when the chande momentum oscillator falls below -50,then that will be an indication of an oversold in the market thus signaling the trader to exit sell position and enter a buy position since the market will start moving upwards while when the chande momentum oscillator rises above +50, that will be an indication of an overbought in the market thus signaling the trader to exit any buy position and enter a sell position since the market will start moving downwards.

This is indicated as from the candlesticks chart below;

 

OANDA%2BWeb%2BTrading%2BPlatform%2B%25282%2529.png

 

 

From the candlesticks chart above, there are 3 points, point A, B, and C. Point A represents the chande momentum oscillator while point B and C represent points above 50 and below -50 respectively.

At point B, the chande momentum oscillator has risen above +50 thus an indication of an overbought market at that point. This will signal the trader to close any running buy position and open a sell position since the market will start moving downwards at that point. On the other hand, at point C, the chande momentum oscillator has fallen below -50 thus an indication of an oversold market at that point.This will signal the trader to close any sell position at that point and open a buy position since the market will start moving upwards.

Concept of divergence

Also, since chande momentum oscillator is based on divergence, it can, therefore, follow that when the market is moving downwards while the chande momentum oscillator curve is moving upwards, then the market will reverse and start moving upwards in the same direction as chande momentum oscillator. On the other hand, if the market is moving upwards while chande momentum oscillator is moving downwards, then the market will reverse and start moving downwards in the same direction as chande momentum oscillator. This is indicated from the candlesticks chart below;

 

351665157-e566e2e9dea755849b6df71816ccbb4b309e5f95b69d1c643b5dc047efe37969.png

 

From the candlesticks chart above, there are two points, point A and B. At point A, the market was moving upwards while the chande momentum oscillator was moving downwards. The market then reverse and start moving in the same direction downwards as the chande momentum oscillator thus signaling the trader to start trading downwards along point A. On the other hand, at point B, the market was downwards while the chande momentum oscillator was moving upwards.The market then reverse and start moving in the same direction upwards as the chande momentum oscillator thus signaling the trader to trade in an upwards market direction along point B.

 


Recommendation 1:If you are a day trader just use 1 min,5 min,15 min and 30 min time frame while if you are a swing trader just use 1 hour and above time frame if you want chande momentum oscillator indicator to work well for you

Recommendation 2:Use common sense while trading with chande momentum oscillator tool

If you would like to support our work, here is our tipping details;

skrill donation:mudigoomondi@gmail.com

Neteller donation:mudigoomondi@gmail.com

Bitcoin:1Fp5aLgRB6WJnC7nxGw57M3JbbexaAWHG2

Ethereum; 0x346570c491b76c7cd51699bdd272762111b743a9

Litecoin: LeEH7B82ccXJ6QoibCryGJNpDGNx2x77fL

Dogecoin: DLShs2vqhMc1ggqo8MPPMBTcPAZdqCZoWd

How do you rate this article?


0

0

QuintoTrader
QuintoTrader

Trader, Blockchain Technologist and Contentpreneur. Also founder and CEO @ Quinto Trader


Quinto Trader
Quinto Trader

Teacher forex school provides individual with training regarding to forex trading and cryptocurrency trading. We also share trading ideas online for both crypto and forex market

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.