Fat Tony's Composite Momentum Histogram (v01)

The Fat Tony's Composite Momentum Histogram (v01) indicator provides a unified momentum signal by blending four distinct oscillators to identify overbought and oversold market conditions. It aims to filter weak price action by weighting the composite output against volume activity, ensuring signals are backed by market participation.

Usage

The indicator displays a histogram that fluctuates around a zero line, typically ranging between -100 and +100. Traders can interpret the color-coded bars to determine momentum strength and potential exhaustion:

• Red Bars: Indicate extreme overbought conditions (above the +100 threshold).
• Green Bars: Indicate extreme oversold conditions (below the -100 threshold).
• Blue Bars: Represent positive momentum within the normal trading range.
• Orange Bars: Represent negative momentum within the normal trading range.

Signals:

• Long Entry: A green triangle appears when the composite signal crosses above the oversold level, provided volume requirements are met.
• Short Entry: A red triangle appears when the composite signal crosses below the overbought level, provided volume requirements are met.
• Trend Filtering: If enabled, signals will only trigger if they align with the 200-period EMA trend.

Details

The tool constructs its signal by normalizing and averaging four core components:

1. Williams %R: Measures relative closing price within a high-low range.
2. Stochastic %K: Compares closing price to recent price history.
3. MACD Histogram: Uses a custom tanh function to adaptively scale the MACD output based on historical volatility.
4. ROC (Rate of Change): Measures percentage change normalized by the Average True Range (ATR).

The final output is multiplied by a smoothed volume ratio. This logarithmic scaling approach ensures that signals are amplified during high-volume periods and dampened during low-liquidity environments.

Settings

Momentum Settings

• Length: The lookback period for Williams %R and Stochastic calculations.
• MACD Fast/Slow/Signal: Standard parameters for the underlying MACD calculation.
• ROC Length: The period used for the Rate of Change calculation.
• MACD StDev Length: The historical window used to normalize the MACD component.

Levels

• Overbought Level: The threshold for extreme upside momentum (default +100).
• Oversold Level: The threshold for extreme downside momentum (default -100).

Volume

• Enable Volume Weighting: Toggles the volume-based signal amplification.
• Volume Sensitivity: Determines the intensity of the volume impact on the histogram.
• Min Avg Volume (5 bars): A threshold filter that prevents signals if recent average volume is too low.

Components

• Include ROC Component: Allows users to include or exclude the ROC from the average.
• Enable Trend Filter: Restricts signals to the direction of the 200 EMA.
• Show Component Plots: A debug feature to view individual oscillator components for tuning.

FAQ

How do I interpret the histogram colors?

The colors differentiate between trend-following momentum (Blue/Orange) and extreme mean-reversion zones (Red/Green) where reversals are more likely.

What does the Volume Sensitivity setting do?

It controls how much the volume ratio affects the final momentum score. Higher values make the indicator more responsive to volume spikes.

How can I access Fat Tony's Composite Momentum Histogram (v01)?

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