Momentum Oscillators:
Objective, Selective, Effective
The MOOSE is Loose
www.cedarcreektrading.com
Momentum Oscillators
I believe the most useful tools employed by technicians are momentum oscillators. The momentum oscillator measures the velocity of directional price movement. When price moves up, at some point the market is considered to be overbought; when it moves down, at some point the market is considered to be oversold. In either case, a reaction or reversal is imminent.
Momentum Oscillators
Moving Average Oscillator Bollinger Band Oscillator StochasticRSI Oscillator Fibonacci Chande Momentum Oscillator Standard Error Oscillator MACD Oscillator
Momentum Oscillators
The slope of the momentum oscillator is directly proportional to the velocity of the move. The distance traveled up or down by the momentum oscillator is proportional to the magnitude of the move. The momentum oscillator is usually characterized by a line on a chart drawn in two dimensions. The Y axis (vertical) represents magnitude or distance the indicator moves; the X axis (horizontal) represents time.
Momentum Oscillators
The momentum oscillator drawn in this manner is characterized by the fact that it moves very rapidly at market turning points and tends to slow down as the market continues the directional move.
CCT Moving Average Oscillator
The first formula I ever programmed was moving average oscillator (with my Tandy Model I1979). Ive built many oscillators based on moving averages. This MAO is a 3day simple moving average of the difference between a 3 and 13 day sma. Mov(Mov(C,3,S)-Mov(C,13,S),3,S)
Bollinger Band Oscillator
Bollinger Bands were developed by John Bollinger and are envelopes that are plotted at two (2) standard deviation levels above and below a moving average. Long ago, Uncle Steve reconfigured the classic bands and invented the Bollinger Band Oscillator. The new indicator constructs two (2) parallel lines instead of the erratic envelopes. These parallel lines represent a measurement of two (2) standard deviations from the mean and are assigned zero and 100 on the chart. The indicator represents the price as it travels above and below the mean (50%) and outside the two standard deviations (zero and 100). Penetration of the upper or lower band represents overbought and oversold conditions. ((C+2*Std(C,21)-Mov(C,21,S))/(4*(Std(C,21)))*100)
StochasticRSI Oscillator
Roger Altman, William Blau, Stanley Kroll, and Tushar Chande have all improved on J. Welles Wilders Relative Strength Index. I believe the best of these derivative indicators is the Stochastic RSI. MetaStock offers one version of this indicator on their formula page. This version is just one of many I use. I like substituting the numbers 3, 5, & 8 in this formula. Mov( ( RSI(8) - LLV( RSI(8) ,8 ) ) / ( ( HHV( RSI(8) ,8) ) - LLV(RSI(8),8) ),3,E) *100
Fibonacci Chande Momentum Oscillator
The Fibonacci Chande Momentum Oscillator (FibCMO) is a modification of the Chande Momentum Oscillator (CMO). The FibCMO is a great timing device for entry, especially if timing into swing tradeswith the trend. This indicator is an example how a trader can take a formula and improve its performance by thinking outside the box. ((CMO(C,3))+(CMO(C,5))+(CMO(C,8)))/3
Standard Error Oscillator
During the past year, I have become fascinated with Standard Error Bands. Heres a formula that I use to determine overbought and oversold situations in the index futures markets. (C+2*STE(C,8)Mov(C,3,S))/(4*(STE(C,8)))*100
MACD Oscillator
Most technical analysts (including Equis International) believe the MACD indicator is "the difference between 12-day and 26-day exponential moving averages." Ive never been one to run with the crowd (even though I was part of the Merrill Lynch herd). Uncle Steves MACD Oscillator substitutes fibonacci numbers, creating an indicator that is smoother than a lot of published versions. (Mov(C,13,E) - Mov(C,21,E))-(Mov((Mov(C,13,E) Mov(C,21,E)),5,E))
LinReg Oscillator
This momentum oscillator is an extension of my late 70s work (see CCT Moving Average Oscillator). It simply plots a comparison of two linear regressions. Both the length of the regression and the amount of lag time are pegged to a fibonacci number. (LinearReg(C,13)/Ref(LinearReg(C,13),-13))-1
Cedar Creek Trading, CTA Steve Karnish, Principal 1-877-668-1125
Uncle Steve hard at work..
