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# Chande momentum oscillator (CMO)

The Chande momentum oscillator is calculated within preset time interval by the following formulas:

diff = Pi - Pi-1,
where Pi -the price (usually closing price) of the current period;
Pi-1 -the price (usually closing price) of the previous period;
If diff > 0, then cmo1i = diff, cmo2i = 0.
If diff < 0, then cmo2i = -diff, cmo1i = 0.
sum1 = Sum(cmo1, n) - summary value of cmo1 within n periods.
sum2 = Sum(cmo2, n) - summary value of cmo2 within n periods.
CMO = ((sum1-sum2)/(sum1+sum2)) 100

The CMO Oscillator basic methods of using are:

• As the indicator of tend. The sell operations are performed when CMO of the short period crosses the CMO of the long period. Purchase operations are performed when CMO of the long period crosses the CMO of the short period.
• The standard method of CMO interpretation is looking for overselling/overbuying. Overselling occurs if value is under -5. Overbuying occurs when the value overcomes +50 point. The aforesaid figures are similar to the 70/30 level of RSI Indicator. The Chande Momentum indicator is a momentum oscillator. This oscillator can be used as a trading signal in two various ways.

The first method is to purchase when the oscillator crosses above its MA line and to sell when the oscillator crosses below its MA line. The second is to measure overbought or oversold levels for a certain currency.

The Chande Momentum indicator is built using the sum over a certain period of price changes on up days, sum (high-low) up, and the sum over the same period of prices on down days, sum (high-low), down. An exponential line's moving average is, afterwards overlaid, upon the oscillator as a signal line. The oscillator needs two parameters: the period for the moving average and the period when the price ranges will be summarized.