AbsCMO Momentum Strategy for Overbought and Oversold Signals

Summary

This strategy takes the absolute value of a normalized Chande Momentum Oscillator calculation to gauge momentum magnitude on a bounded scale. With a stated default length of nine, it enters short when the indicator rises above 70 and long when it falls below 20; a reverse-trading option can swap those directions. The document presents it as a medium-term approach and suggests tuning the thresholds, adding other filters, and defining stop-loss and profit-taking rules.

The published test settings specify BTC_USDT futures on a daily period with hourly base data from February 2023 to February 2024, but no return, drawdown, or trade statistics are reported. The indicator uses the absolute value of the price change over the lookback, divided by average absolute one-period price changes. Because the absolute value removes the sign of the net move, the indicator itself does not distinguish upward from downward momentum; the strategy’s long and short assignments therefore rely on threshold behavior rather than an explicit direction signal. The document also notes that short-term moves may be missed and long holds may incur large drawdowns.

Key ideas

• AbsCMO scales the absolute net price change against average absolute one-period changes over a lookback.
• The stated default thresholds trigger short exposure above 70 and long exposure below 20.
• An optional reverse setting switches the strategy’s long and short assignments.
• The indicator does not retain the sign of momentum, so it does not itself identify trend direction.
• The provided backtest setup has no reported performance statistics.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.