Category · 21 articles
Momentum indicators
A momentum indicator measures how fast price is changing: an oscillator such as the RSI or the stochastic compares the latest close with recent prices, the MACD compares two moving averages. Traders read them in two ways: against overbought and oversold levels, and through divergences, when price makes a new high or low that the indicator does not confirm. This category has 21 momentum indicator guides, sorted by how they are built. Momentum is one of four indicator families; see all of them on the indicators page.
These guides explain how an indicator is calculated and how traders read it. The pattern test bench does not measure indicators. Some guides run their rule on real bars (Bitcoin, the S&P 500 ETF, EUR/USD) and give the sample size; those worked examples are not bench results. For tested patterns, see the pattern statistics table and the methodology.
Most charting platforms can plot the common ones, TradingView among them (affiliate link).
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Relative Strength Index (RSI): Formula, the 70 and 30 Levels, and What They Did on Real PricesOn the S&P 500 ETF, five of six RSI crosses above 70 were followed by a higher close 20 days later. Wilder's formula and what the 70 and 30 levels did.
MACD Indicator: Formula, What 12, 26, 9 Means, and the Signal Line Rule on Real PricesBuying every MACD signal line cross on a year of the S&P 500 ETF won 3 of 11 trades: +6.85% vs +14.83% for holding. The formula and 12, 26, 9 explained.
Stochastic Oscillator: Fast, Slow and Full Formulas, and the 80 and 20 Levels on Real PricesFast, slow and full stochastic formulas, and what the 80 and 20 zones did on real prices: after 8 bullish crosses under 20, Bitcoin was higher 4 times.
Williams %R Indicator: Formula, Overbought and Oversold Levels, and a Real S&P 500 ExampleWilliams %R places the close in its 14-bar range, from 0 to −100. On the S&P 500 ETF it stayed overbought 20 days in a row while the price rose 10.7%.
Oscillators read against overbought and oversold levels
Oscillators with fixed reference levels, such as 70 and 30 for the RSI. A reading near one of them says price moved far and fast, not that it will turn. To try them on a chart, the RSI is built into TradingView (affiliate link).
- Relative Strength Index (RSI): Formula, the 70 and 30 Levels, and What They Did on Real PricesOn the S&P 500 ETF, five of six RSI crosses above 70 were followed by a higher close 20 days later. Wilder's formula and what the 70 and 30 levels did.
- Stochastic Oscillator: Fast, Slow and Full Formulas, and the 80 and 20 Levels on Real PricesFast, slow and full stochastic formulas, and what the 80 and 20 zones did on real prices: after 8 bullish crosses under 20, Bitcoin was higher 4 times.
Stochastic RSI: Formula, RSI vs Stochastic, and Every Signal on Bitcoin Over 250 DaysStochRSI applies the stochastic formula to RSI. On Bitcoin it spent 143 of 250 days overbought or oversold, against 24 for the RSI. What came next.
Stochastic Momentum Index (SMI): Formula, Settings and a Test Against the StochasticWilliam Blau's SMI double-smooths the close's distance from its range midpoint. Its 10, 3, 3 settings, and why it gave fewer whipsaws than the stochastic.- Williams %R Indicator: Formula, Overbought and Oversold Levels, and a Real S&P 500 ExampleWilliams %R places the close in its 14-bar range, from 0 to −100. On the S&P 500 ETF it stayed overbought 20 days in a row while the price rose 10.7%.
Money Flow Index (MFI): Formula, 80 and 20 Levels, MFI vs RSI, and a Real S&P 500 ExampleMFI is a volume-weighted RSI. On the S&P 500 ETF since 1993 it hit 80 or 20 ten times as often as RSI, and overbought readings were followed by more rises.
Chande Momentum Oscillator (CMO): Formula, CMO vs RSI, and Every Signal on BitcoinAbove +50 is overbought, below -50 oversold, yet three of four such entries on Bitcoin kept going. Chande Momentum Oscillator formula, RSI link, signals.
Commodity Channel Index (CCI): Formula, the ±100 Levels, and Two Opposite Strategies on Real PricesIs ±100 on the CCI a signal or a scaling choice? Lambert's formula, then a trend rule and a reversion rule tested on Bitcoin and the S&P 500 ETF over a year.
Rate of change and moving average oscillators
Differences between prices or between moving averages, most of them swinging around a zero line.
Momentum Indicator (MOM): Formula, Zero Line, MOM vs ROC, and a Real S&P 500 ExampleMomentum (MOM) is the close minus the close 12 bars earlier: the formula, the zero line, MOM vs ROC, and the zero-line rule on the S&P 500 since 1970.
Rate of Change (ROC) Indicator: Formula, Readings on Two Markets and the Coppock CurveThe Rate of Change is the percent change over n bars. Its zero line and ±10 levels on two markets, and every Coppock Curve signal since 1995.- MACD Indicator: Formula, What 12, 26, 9 Means, and the Signal Line Rule on Real PricesBuying every MACD signal line cross on a year of the S&P 500 ETF won 3 of 11 trades: +6.85% vs +14.83% for holding. The formula and 12, 26, 9 explained.
Percentage Price Oscillator (PPO): Formula, and Why It Beats the MACD Across PricesThe PPO is the MACD divided by the slow average. On the monthly S&P 500 ETF, the MACD of December 2018 was twice that of October 2007; the PPO was lower.
TRIX Indicator: Formula, Signal Line, TRIX vs MACD, and a Real Bitcoin ExampleTRIX: Jack Hutson’s percent change of a triple-smoothed EMA, its signal line, TRIX vs MACD, and what its zero line did on the S&P 500 since 1971.
Know Sure Thing (KST) Indicator: Pring's Formula, Settings by Timeframe and Real ChartsPring's KST sums four smoothed rates of change: his settings by timeframe, and monthly sells on the S&P 500 ETF, 6 of 7 since 2005 bought back higher.
Awesome Oscillator (AO): Formula, the Saucer and Twin Peaks, and the Zero Line on Real PricesBill Williams's Awesome Oscillator: the formula, the zero line cross, saucer and twin peaks, and a zero line rule that won 4 of 9 trades on Bitcoin.
Accelerator Oscillator (AC): Formula, Color Rules, and Every Signal on Hourly BitcoinBill Williams's Accelerator Oscillator: the AO minus its 5-bar average, the green and red bar rules, and every signal on 250 hours of Bitcoin.
Disparity Index: Formula, How to Read It, Settings and a Real S&P 500 ExampleThe disparity index is the gap between close and moving average. On the S&P 500 since 1970, its highest readings preceded more gains, not pullbacks.
Volume, breadth and squeeze
Momentum built on volume or on market breadth, and the TTM Squeeze, which joins a volatility test and a momentum histogram.
Chaikin Money Flow (CMF): Formula, Zero Line and Buffers, and a Real S&P 500 ExampleAfter bearish Chaikin Money Flow readings, the S&P 500 ETF rose 68.0% of the time over 20 days, vs 64.8% after bullish ones. Formula, zones, a real chart.
Chaikin Oscillator: Formula, How It Differs From Chaikin Money Flow, and a Real DivergenceThe Chaikin Oscillator is the 3-day minus 10-day EMA of the accumulation/distribution line. Formula, how it differs from Chaikin Money Flow, and real signals.
McClellan Oscillator: Formula, Worked Example, A/D Line and TRINThe McClellan Oscillator is a MACD of market breadth: the 19-day minus the 39-day EMA of net advances, worked step by step, with the A/D line and TRIN.
TTM Squeeze Indicator: Formula, Settings, Thinkorswim and What 292 Squeezes DidTTM Squeeze: John Carter’s Bollinger Bands inside Keltner Channels, the formula, settings, thinkorswim inputs, and what 292 S&P 500 squeezes did after firing.