CMO Indicator MT4 | MT5

The CMO Indicator on MetaTrader 4, developed by Tushar Chande, is defined as a momentum indicator. This indicator is ranging between +100 and -100 scale giving traders a clear view of net momentum using the 0 level as a balance point. By downloading this indicator on MT5, traders as well, can assess the condition of the market, an oversold or overbought states, using the +50 and the -50 values. Furthermore, this indicator generates buy or sell signals whenever the momentum crosses the balance point.

To help traders understand how this indicator works, its formula is derived from the difference between the curent price and the previous one, highlighting the momentum over a specified periode : 

CMO = [( Sum of Gains over N periods - Sum of Losses over N periods ) / ( Sum of Gains over N periods - Sum of Losses over N periods )] * 100

• Gains are the periods where the close price is higher than the previous period's close.
• Losses are the periods where the close price is lower than the previous period's close. 

For the MetaTrader 4 trading example, during an uptrend, the CMO indicator provides a buy signal at the beginning of the trend and moves within the range of 0 to +100. When the momentum remains in the upper 50-point range, the market is considered overbought. Eventually, the momentum declines to the 0 level, crosses it and the trend transitions into a downtrend.

For the trading example on MetaTrader 5, in a downtrend, the CMO indicator gives a sell signal on the start of the trend and then it ranged between the 0 and -100 levels. As a result of moving between the -50 and -100 levels, the market enters an oversold and the momentum shifts toward the balance point and crosses it and signals a trend reversal.