True Momentum Oscillator - Universal Edition

The True Momentum Oscillator - Universal Edition indicator provides a refined view of market momentum by calculating the delta of price, offering a clearer picture of trend direction, reversals, and potential divergences compared to traditional momentum oscillators.

Usage

The True Momentum Oscillator (TMO) can be utilized similarly to a combination of the RSI and MACD. It features overbought and oversold levels, typically set at 70 and -70, to identify potential reversal zones. Users can monitor the relationship between the TMO line and the Signal line:

• Crossovers: When the TMO line crosses above the Signal line, it indicates a bullish shift in momentum. Conversely, a cross below the Signal line indicates bearish momentum.
• Histogram: The included histogram visualizes the difference between the TMO and Signal lines, making it easier to spot trend strength and momentum shifts.
• Breakouts: Because the indicator assigns a score based on price relative to a lookback period, it reacts quickly to breakouts, especially after periods of consolidation.

Details

This implementation is an optimized version of the popular ThinkorSwim (ToS) indicator. Key improvements include:

• Normalization: The graph is normalized to a fixed range between -100 and 100. This standardization ensures that entry signals and overbought/oversold levels remain consistent regardless of the chosen lookback length.
• Lookback Logic: The indicator has been adjusted to look back exactly the number of candles specified in the settings, aligning its behavior with standard technical indicators.
• Single Source Flexibility: By utilizing a single price source, the tool maintains flexibility and accuracy even in markets where price gaps may occur.

Settings

• Length: Determines the number of historical candles used to calculate the momentum score.
• Source: The price data used for the calculation (e.g., Close, Open, High, Low).
• Calc length: The length used for the initial EMA smoothing of the oscillator values.
• Smooth length: The length used for the final smoothing of the TMO line and the subsequent Signal line.

FAQ

How do I interpret the overbought and oversold levels?

The bands at 70 and -70 act as zones where the price momentum might be overextended. A reversal from these levels can signal a potential change in trend direction.

How does this differ from a standard Momentum oscillator?

Unlike standard oscillators that might use simple price differences, TMO evaluates price relative to every candle within its lookback period, providing a more robust score that reacts effectively to breakouts.

How can I access the True Momentum Oscillator - Universal Edition?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.