
Chande Momentum Oscillator
The Chande momentum oscillator is a technical momentum indicator introduced by Tushar Chande in his 1994 book _The New Technical Trader_. Overbought-oversold indicators are less effective in strongly trending markets. Chande Momentum Oscillator \= s H − s L s H \+ s L × 1 0 0 where: s H \= the sum of higher closes over N periods s L \= the sum of lower closes of N periods \\begin{aligned} &\\text{Chande Momentum Oscillator}=\\frac{sH - sL}{sH + sL}\\times 100\\\\ &\\textbf{where:}\\\\ &sH=\\text{the sum of higher closes over N periods}\\\\ &sL=\\text{the sum of lower closes of N periods}\\\\ \\end{aligned} Chande Momentum Oscillator\=sH+sLsH−sL×100where:sH\=the sum of higher closes over N periodssL\=the sum of lower closes of N periods 1. Calculate the sum of higher closes over N periods. 2. Calculate the sum of lower closes over N periods. 3. Subtract the sum of lower closes over N periods from the sum of higher closes over N periods. 4. Add the sum of lower closes over N periods to the sum of higher closes over N periods. 5. Divide 4 from 3 and multiply by 100. 6. Plot the result. The Chande oscillator is similar to other momentum indicators such as Wilder’s relative strength index (RSI) and the stochastic oscillator. For example, if the 50-day moving average crosses above the 200-day moving average (golden cross), a buy signal is confirmed when the Chande momentum oscillator crosses above 0, predicting prices are headed higher. The Chande momentum oscillator is a technical momentum indicator introduced by Tushar Chande in his 1994 book _The New Technical Trader_.

What Is the Chande Momentum Oscillator?
The Chande momentum oscillator is a technical momentum indicator introduced by Tushar Chande in his 1994 book The New Technical Trader. The formula calculates the difference between the sum of recent gains and the sum of recent losses and then divides the result by the sum of all price movements over the same period.




The Formula for the Chande Momentum Oscillator
Chande Momentum Oscillator = s H − s L s H + s L × 1 0 0 where: s H = the sum of higher closes over N periods s L = the sum of lower closes of N periods \begin{aligned} &\text{Chande Momentum Oscillator}=\frac{sH - sL}{sH + sL}\times 100\\ &\textbf{where:}\\ &sH=\text{the sum of higher closes over N periods}\\ &sL=\text{the sum of lower closes of N periods}\\ \end{aligned} Chande Momentum Oscillator=sH+sLsH−sL×100where:sH=the sum of higher closes over N periodssL=the sum of lower closes of N periods
How To Calculate the Chande Momentum Oscillator
- Calculate the sum of higher closes over N periods.
- Calculate the sum of lower closes over N periods.
- Subtract the sum of lower closes over N periods from the sum of higher closes over N periods.
- Add the sum of lower closes over N periods to the sum of higher closes over N periods.
- Divide 4 from 3 and multiply by 100.
- Plot the result.
Understanding the Chande Momentum Oscillator
The Chande oscillator is similar to other momentum indicators such as Wilder’s relative strength index (RSI) and the stochastic oscillator. It measures momentum on both up and down days and does not smooth results, triggering more frequent oversold and overbought penetrations. The indicator oscillates between +100 and -100.
Chande Momentum Oscillator Interpretation
A security is deemed to be overbought when the Chande momentum oscillator is above +50 and oversold when it is below -50. Many technical traders add a 10-period moving average to this oscillator to act as a signal line. The oscillator generates a bullish signal when it crosses above the moving average and a bearish signal when it drops below the moving average.
The oscillator can be used as a confirmation signal when it crosses above or below the 0 line. For example, if the 50-day moving average crosses above the 200-day moving average (golden cross), a buy signal is confirmed when the Chande momentum oscillator crosses above 0, predicting prices are headed higher.
Trend strength can also be measured using the Chande momentum oscillator. In this methodology, the oscillator's value denotes the strength or weakness of the expected trend.
Example of How To Use the Chande Momentum Oscillator
Traders can use the Chande momentum oscillator to spot positive and negative price divergence between the indicator and underlying security. A negative divergence occurs if the underlying security is trending upward and the Chande momentum oscillator is moving downwards. A positive divergence occurs if the price is declining but the oscillator is rising.
In the above example, Apple made a new high in late August and another new high in late September. Instead, the oscillator made a lower high in late September, confirming a bearish divergence. A trader who decides to sell short can place a stop-loss order above the September swing high and take profits when the oscillator crosses below -50.
The Chande Momentum Oscillator vs. the Stochastic Oscillator
The Chande momentum oscillator computes relative strength visually through patterns that are similar to Wilder’s RSI, with relative positioning between highs and lows determining the longer-term bullish or bearish outlook.
Stochastic calculations generate more rhythmic waves, alternating between overbought and oversold extremes. This indicator always utilizes a second “signal” line, in which crossovers higher and lower dictate buying and selling opportunities.
Related terms:
Bear
A bear is one who thinks that market prices will soon decline, or has general market pessimism. read more
Bull
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Closing Price
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Golden Cross
A golden cross is a candlestick pattern that is a bullish signal in which a relatively short-term moving average crosses above a long-term moving average read more
Moving Average Convergence Divergence (MACD)
Moving Average Convergence Divergence (MACD) is defined as a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. read more
Moving Average (MA)
A moving average (MA) is a technical analysis indicator that helps smooth out price action by filtering out the “noise” from random price fluctuations. read more
Percentage Price Oscillator (PPO)
The percentage price oscillator (PPO) is a technical momentum indicator that shows the relationship between two moving averages in percentage terms. read more
Price Zone Oscillator and Uses
The Price Zone Oscillator plots a graph that shows whether or not the most recent closing price is above or below an averaged historical price. read more
Relative Strength Index (RSI) & Formula
The Relative Strength Index (RSI) is a momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions. read more
Signal Line and Uses
Signal lines are used in technical indicators, especially oscillators, to generate buy and sell signals or suggest a change in a trend. This occurs when another indicator or line crosses the signal line. read more