The Chande Momentum Oscillator (CMO) is a technical indicator developed by Tushar Chande and explained in his book Beyond Technical Analysis. Designed to measure momentum, the CMO calculates the difference between sums of recent gains and losses without smoothing, which allows traders to spot strong overbought and oversold conditions.
CMO is an essential tool for traders who want to trade with momentum. It works across all timeframes and instruments, though it is most effective in trending markets rather than ranging markets.
You can download the Chande Momentum Oscillator for free at IndicatorForest.com and enhance your momentum-based trading strategies.
The CMO fluctuates between +100 and -100, providing clear signals for momentum and potential reversals:
Overbought: Above +50, indicating a potential trend reversal or slowdown in bullish momentum.
Oversold: Below -50, signaling a potential reversal in bearish momentum.
Zero line: Serves as the pivot point. When the indicator is above zero, it suggests bullish momentum, and below zero indicates bearish momentum.
The indicator provides a direct view of market momentum without smoothing, making breakouts and trend shifts more apparent compared to smoothed oscillators.
1. Basic Momentum Signals:
Bullish Trend: When the CMO rises above zero, the trend is gaining upward momentum. Consider opening long positions.
Bearish Trend: When the CMO falls below zero, downward momentum is increasing, suggesting short positions.
2. Overbought/Oversold Strategy:
Overbought (+50 or higher): Be prepared for a potential trend reversal; consider exiting longs or looking for short opportunities.
Oversold (-50 or lower): Bullish reversal may occur; monitor for long positions.
Extreme readings near +100/-100 indicate very strong momentum but can also signal exhaustion.
3. CMO with Moving Average Confirmation:
Apply a moving average (MA) on the CMO line.
Bullish signal: CMO crosses above the MA in an uptrend.
Bearish signal: CMO crosses below the MA in a downtrend.
This combined approach helps confirm whether strong momentum is likely to continue or reverse, improving trade accuracy.
For instance, in a EUR/USD chart, the CMO can simulate the price ups and downs:
When the CMO enters the overbought zone (+50) while the price reaches previous resistance, the market may reverse.
Traders observing this scenario should be prepared to enter short positions as momentum begins to wane.
Conversely, when the CMO is in the oversold zone (-50) and price touches previous support, a bullish reversal may be imminent.
By following CMO signals, traders can align entries with market momentum and avoid trading in weak, range-bound conditions.
Measures momentum without smoothing, providing timely signals.
Works on all instruments and timeframes.
Identifies overbought and oversold conditions clearly.
Can be combined with other indicators like MA, RSI, or MACD for confirmation.
Free and easy to download on MT4.
Considerations:
Most effective in trending markets; less reliable during sideways trading.
Combine with price action or other momentum tools for more accurate signals.
The Chande Momentum Oscillator (CMO) for MT4 is a versatile and reliable indicator to measure market momentum and identify potential trend reversals. Rising above the zero line signals bullish momentum, while dropping below indicates bearish momentum.
You can download the CMO for MT4 for free at IndicatorForest.com. Pair it with moving averages or other momentum indicators to refine your trading strategy and make more informed decisions.
Published:
Nov 11, 2025 22:35 PM
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