Chande Momentum Oscillator: RSI without the smoothing

What it measures

The Chande Momentum Oscillator sums the up moves and the down moves over a window and expresses their difference as a percentage of their total. It runs from −100 to +100 with zero at balance.

The construction is close to RSI, with one deliberate difference: there is no smoothing. The sums are raw, so the indicator responds immediately rather than through an average.

Chande designed it that way on the argument that smoothing hides exactly the momentum shifts a momentum indicator exists to show.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Split bar-to-bar changes into gains and losses.

2. 2

   Sum the gains over the lookback, and sum the losses.

3. 3

   Compute (sum of gains − sum of losses) divided by (sum of gains + sum of losses), as a percentage.

Settings

Nine is common for a fast reading and twenty for a filter. The shorter the window, the more often it saturates, which is fine when the output feeds another calculation and unusable when it is being traded directly. There is no smoothing parameter to soften it — if the output is too noisy, the window is the only dial.

How to read it

• Plus and minus fifty are the conventional extremes, and the indicator reaches them far more often than RSI reaches seventy and thirty.
• Zero is a genuine balance point: equal weight of up and down movement over the window.
• Because it is unsmoothed it turns immediately, which makes it useful as an input to other calculations — variable-period averages use it to detect how trendy a market is.
• It is bounded at plus and minus one hundred, which happens only when every bar in the window moved the same way — a genuine one-sided run rather than a strong one.

Where it misleads

Related indicators