Chande Momentum Oscillator (CMO)
The Pure, Unsmoothed Momentum Amp That Cuts Through the Noise
In 1994, quant legend Tushar Chande dropped a momentum bombshell: the Chande Momentum Oscillator (CMO). Bounded neatly between +100 and –100, it measures raw directional power by comparing the sum of recent gains to the sum of recent losses – no fancy smoothing, no asymmetric tricks like RSI. The result is a high-gain, zero-lag oscillator that screams when momentum is surging and whispers when it's fading. It's the clean, symmetrical alternative for traders who want pure thrust readings without the baggage of traditional momentum tools.
The Formula – Raw and Symmetric
Simple yet powerful:
- Sum of Ups (SU): Total gains on up days over N periods.
- Sum of Downs (SD): Total losses (absolute) on down days over N periods.
- CMO = 100 × (SU − SD) / (SU + SD)
In LaTeX: \text{CMO}_t = 100 \times \frac{\sum \text{Ups} - \sum \text{Downs}}{\sum \text{Ups} + \sum \text{Downs}}
No smoothing, no absolutes on ups – pure directional imbalance.
Unlike RSI, up and down moves are treated symmetrically – cleaner momentum read.
Reading the Oscillator – Zones and Signals
Classic thresholds:
- +50 to +100: Strong bullish momentum – overbought territory, but real power in trends.
- –50 to –100: Strong bearish momentum – oversold, potential short covering.
- Near zero: Balanced tug-of-war – no clear winner.
- Crossing zero: Momentum regime shift emerging.
- Sustained extremes: Powerful trend – ride it, don't fade blindly.
Bounces off ±50/±70 often mark reactions; divergences are gold.
Parameter Tweaks – Match Your Style
Period choices:
- Short (9–13): Fast markets (intraday FX/futures) – quick bursts, more noise.
- Classic (14–20): Swing trading sweet spot – responsive yet reliable.
- Long (25–35): Position/weekly charts – filters churn, catches big shifts.
Pro move: Add a light MA (3–5 period) over CMO to tame whipsaws without killing edge.
Pro Trading Setups
Battle-tested plays:
- Threshold bounce: CMO hits –50 + reversal candle → long in uptrend.
- Centerline cross: CMO >0 in rising MA environment → bullish bias confirmed.
- Band-pass trend: Stay long while CMO >+50; exit when drops below.
- Divergence hunter: Price higher high + CMO lower high → exhaustion short.
Chande's original: use ±50 as trend filters – inside = range, outside = trend.
Smart Combinations
Pair for power:
- Trend filter: 50-SMA or ADX >25 – only trade CMO signals with trend.
- ATR stops: Extreme CMO entries + volatility-based exits.
- Volume: CMO leaving extreme + volume spike = conviction boost.
- Multi-TF: Weekly CMO bias + daily CMO pullbacks = high-probability swings.
Strengths and Realistic Caveats
The Wins
- Bounded scale + symmetric math = clean, comparable readings.
- Zero lag from smoothing – lightning response to momentum shifts.
- Excellent for spotting pure overbought/oversold and divergences.
The Gotchas
- Unsmoothed = choppy in low-volatility ranges.
- Extremes persist in strong trends – can mislead counter-trend traders.
- Price-only – add volume/volatility context manually.
Your CMO Launch Checklist
- Start with 14–20 period classic settings.
- Define your thresholds (±50 standard, backtest others).
- Add trend and volume filters – never solo in chop.
- Watch zero-line and divergences closely.
- Review thresholds when volatility regime changes.
Key Takeaways
CMO delivers pure, unsmoothed momentum in a clean ±100 range.
Symmetric gain/loss math + zero lag = sharper, fairer readings than RSI.
±50 levels flag strong momentum; zero crosses signal shifts.
Perfect for trend filters, divergences, and extreme bounces.
Filter heavily, add context – and CMO becomes your momentum amplifier. Stay pure and trade strong!
Chande Momentum Oscillator (CMO)
The Pure, Unsmoothed Momentum Amp That Cuts Through the Noise
In 1994, quant legend Tushar Chande dropped a momentum bombshell: the Chande Momentum Oscillator (CMO). Bounded neatly between +100 and –100, it measures raw directional power by comparing the sum of recent gains to the sum of recent losses – no fancy smoothing, no asymmetric tricks like RSI. The result is a high-gain, zero-lag oscillator that screams when momentum is surging and whispers when it's fading. It's the clean, symmetrical alternative for traders who want pure thrust readings without the baggage of traditional momentum tools.
Table of Contents
The Formula – Raw and Symmetric
Simple yet powerful:
- Sum of Ups (SU): Total gains on up days over N periods.
- Sum of Downs (SD): Total losses (absolute) on down days over N periods.
- CMO = 100 × (SU − SD) / (SU + SD)
In LaTeX: \text{CMO}_t = 100 \times \frac{\sum \text{Ups} - \sum \text{Downs}}{\sum \text{Ups} + \sum \text{Downs}}
No smoothing, no absolutes on ups – pure directional imbalance.
Unlike RSI, up and down moves are treated symmetrically – cleaner momentum read.
Reading the Oscillator – Zones and Signals
Classic thresholds:
- +50 to +100: Strong bullish momentum – overbought territory, but real power in trends.
- –50 to –100: Strong bearish momentum – oversold, potential short covering.
- Near zero: Balanced tug-of-war – no clear winner.
- Crossing zero: Momentum regime shift emerging.
- Sustained extremes: Powerful trend – ride it, don't fade blindly.
Bounces off ±50/±70 often mark reactions; divergences are gold.
Parameter Tweaks – Match Your Style
Period choices:
- Short (9–13): Fast markets (intraday FX/futures) – quick bursts, more noise.
- Classic (14–20): Swing trading sweet spot – responsive yet reliable.
- Long (25–35): Position/weekly charts – filters churn, catches big shifts.
Pro move: Add a light MA (3–5 period) over CMO to tame whipsaws without killing edge.
Pro Trading Setups
Battle-tested plays:
- Threshold bounce: CMO hits –50 + reversal candle → long in uptrend.
- Centerline cross: CMO >0 in rising MA environment → bullish bias confirmed.
- Band-pass trend: Stay long while CMO >+50; exit when drops below.
- Divergence hunter: Price higher high + CMO lower high → exhaustion short.
Chande's original: use ±50 as trend filters – inside = range, outside = trend.
Smart Combinations
Pair for power:
- Trend filter: 50-SMA or ADX >25 – only trade CMO signals with trend.
- ATR stops: Extreme CMO entries + volatility-based exits.
- Volume: CMO leaving extreme + volume spike = conviction boost.
- Multi-TF: Weekly CMO bias + daily CMO pullbacks = high-probability swings.
Strengths and Realistic Caveats
The Wins
- Bounded scale + symmetric math = clean, comparable readings.
- Zero lag from smoothing – lightning response to momentum shifts.
- Excellent for spotting pure overbought/oversold and divergences.
The Gotchas
- Unsmoothed = choppy in low-volatility ranges.
- Extremes persist in strong trends – can mislead counter-trend traders.
- Price-only – add volume/volatility context manually.
Your CMO Launch Checklist
- Start with 14–20 period classic settings.
- Define your thresholds (±50 standard, backtest others).
- Add trend and volume filters – never solo in chop.
- Watch zero-line and divergences closely.
- Review thresholds when volatility regime changes.
Key Takeaways
CMO delivers pure, unsmoothed momentum in a clean ±100 range.
Symmetric gain/loss math + zero lag = sharper, fairer readings than RSI.
±50 levels flag strong momentum; zero crosses signal shifts.
Perfect for trend filters, divergences, and extreme bounces.
Filter heavily, add context – and CMO becomes your momentum amplifier. Stay pure and trade strong!
Related Terms
Apply This Knowledge
Ready to put Chande Momentum Oscillator (CMO) into practice? Use our tools to analyze your portfolio and explore market opportunities.
This content is also available on our main website for public access.