Price Momentum Oscillator

The Price Momentum Oscillator indicator is a momentum-based technical analysis tool that tracks the rate of change of an asset's price through double exponential smoothing to identify trend strength and potential reversals.

Usage

The indicator can be used to identify trend direction and momentum shifts through its two primary components: the PMO line and the Signal line.

• Trend Identification: When the PMO is above its signal line, it suggests bullish momentum. Conversely, when the PMO is below its signal line, it indicates bearish momentum.
• Zero-Line Crossovers: Movements above the zero line suggest a positive long-term trend, while movements below zero suggest a negative long-term trend.
• Visual Aids: Users can enable ribbon filling to highlight the area between the PMO and the Signal line, or use background highlights to identify zero-line crossovers. Crossover markers can also be enabled to pinpoint exactly where the PMO and Signal lines intersect.

Details

The Price Momentum Oscillator (PMO) is calculated by taking a 1-period Rate of Change (ROC) of the source price. This value is then smoothed using a first exponential moving average (EMA) and multiplied by 10. The resulting value is smoothed a second time with another EMA to produce the final PMO line. A third EMA, known as the Signal Length, is applied to the PMO line to create the Signal line. This multi-step smoothing process helps filter out market noise while maintaining responsiveness to significant price changes.

Settings

• 1st Smoothing Length: Determines the period for the first exponential smoothing of the price rate of change.
• 2nd Smoothing Length: Determines the period for the second exponential smoothing.
• Signal Length: Sets the period for the moving average applied to the PMO to create the Signal line.
• Source: The price data used for calculations (default is "Close").
• Highlight PMO/Signal Crossovers?: Toggles circular markers on the chart when the PMO crosses its signal line.
• Highlight Zero Line Crossovers?: Toggles background coloring based on whether the PMO is above or below the zero line.
• Apply Ribbon Filling?: Fills the space between the PMO and Signal lines with color to represent the current trend direction.

FAQ

How do I interpret the PMO crossing the zero line?

A crossover above zero indicates that the internal momentum has turned positive on a broader scale, while a cross below zero indicates negative momentum.

What are the default smoothing periods?

The indicator typically uses a 35-period first smoothing, a 20-period second smoothing, and a 10-period signal length for a balanced view of momentum.

How can I access the Price Momentum Oscillator?

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