The Chande Momentum Oscillator, abbreviated as Chandle, is a technical indicator used in financial markets to measure the momentum of a security’s price. It is similar to the Relative Strength Index (RSI) but uses a different calculation method to provide momentum signals.
Syntax:
Chandle[N](price)This function takes two parameters:
- N: The period over which the oscillator is calculated.
- price: The price input (e.g., Close, Open, High, Low) used to calculate the oscillator.
Calculation:
The Chande Momentum Oscillator is calculated by first determining the positive and negative variations in the price:
- pos: Positive variation, set to the difference if today’s price is higher than yesterday’s; otherwise, it is 0.
- neg: Negative variation, set to the absolute difference if today’s price is lower than yesterday’s; otherwise, it is 0.
Next, calculate the moving averages of these variations over the specified period N:
- Mpos: Moving average of positive variations.
- Mneg: Moving average of negative variations.
The final oscillator value is then calculated using the formula:
(Mpos - Mneg) / (Mpos + Mneg) * 100
This results in a value that oscillates between -100 and 100.
Example:
Chandle1 = Chandle[20](High)
Chandle2 = Chandle[20](Low)
Result = (Chandle1 + Chandle2) / 2
RETURN Result AS "Average Chandle"In this example, the Chande Momentum Oscillator is calculated for both the high and low prices over a 20-period span. The average of these two oscillators is then computed and returned as “Average Chandle”.
Additional Information:
The Chande Momentum Oscillator is useful for identifying potential buy and sell signals based on its value crossing specific thresholds (-50 for buys, +50 for sells). It can also be used to detect divergences which may indicate potential reversals. Applying a moving average to the oscillator can help smooth out short-term fluctuations and provide clearer signals.