The Chande Momentum Oscillator (CMO) is a technical indicator used in financial analysis to measure a security's momentum. It was developed by Tushar Chande and first introduced in his book "The New Technical Trader" in 1994. The CMO is designed to identify overbought and oversold conditions, as well as trend reversals, by measuring the difference between the sum of gains and losses over a certain period.
The CMO is calculated by taking the difference between the sum of gains and the sum of losses over a given period, and dividing that by the sum of gains and losses over the same period. The result is then multiplied by 100 to create a percentage value. The indicator oscillates between -100 and +100, with readings above +50 considered bullish and readings below -50 considered bearish.
Traders use the CMO in conjunction with other technical indicators and chart patterns to confirm price action signals and identify potential entry and exit points. Like all technical indicators, the CMO is not infallible and should be used in conjunction with other forms of analysis to make trading decisions.
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