True Momentum Oscillator

The True Momentum Oscillator indicator is a trend-following and momentum tool that calculates the delta of price relative to historical opens to provide a clearer picture of market sentiment and momentum shifts.

Usage

The True Momentum Oscillator can be utilized to identify trend direction, potential reversals, and momentum strength through several visual components:

• Main Signal & Smooth Line: The oscillator turns green when the Main Signal is above the Smooth Signal line, indicating bullish momentum, and red when below, indicating bearish momentum.
• Crossovers: Traders often look for crossovers between the Main Signal and the Smooth Signal line as potential entry or exit points. A crossover of the zero line can also be used to confirm a change in trend direction.
• Momentum Lines: The TMO Main Momentum (blue) and Smooth Momentum (gray) lines help verify the strength of the oscillator's movements. These lines are particularly useful for identifying divergences, where the price makes a new high or low but the momentum lines do not, suggesting a weakening trend.
• Overbought/Oversold Regions: The gray highlighted boundaries represent extreme levels. Crossovers occurring within these regions can be considered higher-probability signals for mean reversion.

Details

The TMO calculates price delta by comparing the current close to the open of a specified number of bars ago. Unlike a standard RSI or Stochastics, it focuses on the relationship between opens and closes over a lookback period to determine "True" momentum. This raw data is then processed through multiple layers of user-selectable moving averages to create a reactive yet smooth signal. The inclusion of secondary momentum lines (calculating the change in the signals themselves) allows users to see if the oscillator's trend is accelerating or decelerating.

Settings

Core Calculation

• TMO Length: The lookback period used to determine the price delta.
• Calculated Length: The length of the first moving average applied to the raw data.
• Smooth Line Length: The length used for the signal line smoothing.
• Momentum Length: The lookback period used for the TMO and Smooth Signal momentum lines.

Moving Average Types

• TMO length moving average selection: Choose between EMA, SMA, RMA, VWMA, or HULL for the primary calculation.
• Calculated length moving average selection: Select the MA type for the internal calculation step.
• Smooth length moving average selection: Select the MA type for the signal line smoothing.

FAQ

How do I use the momentum lines on the True Momentum Oscillator?

The momentum lines track the rate of change of the TMO signals. When these lines diverge from the price action or the main oscillator, it may indicate a trend exhaustion or a potential reversal.

What are the default overbought and oversold levels?

The indicator dynamically calculates the overbought and oversold zones based on 70% of the TMO Length setting to ensure the boundaries remain relative to the selected lookback period.

How can I access the True Momentum Oscillator?

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