What it measures
Tushar Chande's momentum oscillator measures the balance of up-moves and down-moves over a window, like the RSI, but without Wilder's smoothing and on a symmetric scale from −100 to +100. It reacts faster than the RSI and reaches its extremes more often.
The calculation
CMO = 100 × (Σ up-moves − Σ down-moves) / (Σ up-moves + Σ down-moves), over n bars
Up-moves and down-moves are close-to-close changes. With all gains it reads +100, all losses −100, balance 0.
Inputs and defaults
- Length: 9 in the Pine built-in; 14 and 20 elsewhere.
- Thresholds: +50 and −50.
How it is read
Above +50 overbought, below −50 oversold, zero line as the trend divider. Chande also used it as a volatility measure: the absolute value is high when price is moving one way and low when it is churning, which is the basis of his variable-index dynamic average.
Where it fails
No smoothing means every bar entering or leaving the window shows up directly; it spends more time at its extremes than the RSI and produces more signals, most of them in trends where the signals are wrong. It is one of the least used oscillators in the screened universe.
How the desk reads it
It is on this list because it is the clearest illustration of what Wilder's smoothing does to the RSI: remove it and this is what you get, more signals and more wrong ones. A CMO rule is read on its trade count first.
In the desk's screen
Of the 614 screened strategies in the library, 1 (0.2%) use this indicator somewhere in their logic.
None of those reached the after-fee replay, which says more about how the indicator is usually combined than about the indicator.
- Divergence Strategy [Trendoscope®] Joining a move
The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.