The True Momentum Oscillator (TMO) calculates the delta of the price using the open and close. We have taken the true momentum oscillator a step further and have added the momentum of the main signal (TMO) and the smooth signal line. We believe this helps give a clearer picture of price momentum and helps verify crossovers of the TMO and the smooth signal line. The momentum lines can also help confirm a divergence of the TMO. We have also added multiple moving average options so the user can customize the TMO to suit their needs.
TMO- Green when above Smooth Signal Line, red when below Smooth Signal Line Smooth Signal- Gray Line Histogram- TMO-Smooth Signal TMO Momentum- Orange line Smooth Signal Momentum- Yellow line Overbought/Oversold regions- Gray highlighted boundaries
The TMO has defined overbought and oversold regions where either a crossover signal or divergence in the oscillator itself can be taken as a signal. Similar to the MACD, a crossover of the zero line by the TMO can also be utilized as a signal.
Notes de version
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-added bar coloring for when the tmo crosses the signal line
Almost hate to comment on this hidden gem.... let it remain hidden lol Thank you for your great work and generosity sir !
LeafAlgo
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@TransitMan, thank you so very much! Had a lot of fun making this one. Glad you enjoy it and we hope it helps you!
TransitMan
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From August 2014 into 2015 there was a very strong bear move which your volatility compression shows beautifully For an old guy who hasn't even solved an algebraic equation in 40 years what is the TMO showing here as it rises during that same period?
LeafAlgo
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@TransitMan, hey thats a good call out. So the yellow and orange lines are the plotted Momentum calculations of the tmo and its signal line. So you could almost think of it as the momentum of the true momentum. When those momentum lines start to rise its an indication that the trend could be losing its steam. I personally use them as kind of an early warning system, or a way to gauge the risk on entering a trade when comparing it to the tmo signal line crossover. As sometimes divergences aren't super clear on the actual tmo. So here with the tmo crossovers in the oversold region and their respective momentum lines diverging up I would be less likely to take any trades going short. Especially once the momentum lines crossed the midline. It's slightly comparing to the same concept as the RSI and the Stochastic RSI. Where the Stochastic RSI can be viewed as a measurement of the RSI momentum. Let us know if this helps!
TransitMan
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@LeafAlgo, Yeah and I screwed up my original question it really is the Momentum of the momentum(Orange/Yellow) that I was trying to wrap my head around as it accelerates upward while price is crashing downward...something akin to a hidden bearish divergence there? and if you could expound upon why that is occurring while the TMO itself has very little movement would be greatly appreciated and thanks a ton for your enlightening first response :) It's also super interesting that the TMOM stays elevated during that time and barely dips below the zero line before they both break to the upside again
LeafAlgo
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@TransitMan No problem! Below I have put the calculations for those momentum lines. The standard setting we have for the mom_len is 14, but this is adjustable. So what's being calculated below is the difference between the current tmo and the tmo from 14 periods/bars ago. So as the difference gets smaller or becomes equal that can be an indication that the overall momentum is lessening or turning directions and can be used to confirm the underlying tmo crossover signal. So the reason the momentum lines hover around the 0 line is because the momentum on the current bar and the one from 14 periods ago were nearly equal. So in theory the strongest signals will occur when the momentum lines cross the 0 line.