Momentum Bias Index

The Momentum Bias Index tool assesses market momentum bias by calculating and comparing positive and negative momentum components to determine the prevailing trend direction. It quantifies the phenomenon where oscillators in an uptrend maintain stronger positive values than negative ones, providing a clear visual representation of trend strength and potential exhaustion.

Usage

The indicator can be used as a standalone oscillator or in Overlay Mode to color price bars based on momentum bias. When positive momentum bias exceeds negative bias, a bullish trend is indicated; conversely, a higher negative bias suggests a bearish trend.

Traders can look for the "TP" labels (in overlay mode) or "X" markers (in oscillator mode). These take-profit signals occur when momentum reaches an extreme—crossing the Impulse Boundary—and then begins to mean-revert. This helps traders identify moments of potential momentum climax to lock in gains.

Details

The script calculates momentum by measuring the difference between the current source price and its value $n$ bars ago. This value is then normalized by the Average True Range (ATR) to create a standard deviation-based momentum value. These values are separated into positive and negative components, summed over a specified bias length, and optionally smoothed using a Hull Moving Average (HMA).

The Impulse Boundary acts as a dynamic threshold, calculated using a Moving Average of the average bias plus a standard deviation multiplier. When momentum exceeds this boundary, it indicates a significant spike or impulse move.

Settings

• Source: The price data used for calculations (e.g., Close, HL2).
• Momentum Length: The lookback period for the initial momentum calculation.
• Bias Length: The window used to sum momentum values to evaluate the current bias.
• Smooth Length: The period for the HMA smoothing applied to the bias components.
• Impulse Boundary Length: The lookback period for the dynamic threshold calculation.
• Standard Deviation Multiplier: Adjusts the sensitivity of the impulse boundary; higher values increase noise tolerance.
• Smooth Indicator: Toggles the Hull Moving Average smoothing on or off.
• Overlay Mode: When enabled, the indicator colors the chart candles and displays TP labels instead of appearing in a separate pane.

FAQ

How do I interpret the take-profit signals? Signals appear when a momentum component exceeds the Impulse Boundary and then starts to decrease, suggesting that the current impulse move is losing steam.

What is the difference between Bias Length and Momentum Length? Momentum Length determines the speed of the underlying oscillator, while Bias Length determines how many of those oscillator values are aggregated to define the overall trend bias.

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