Chande’s Dynamic Momentum Index Adapts RSI Length to Volatility

Summary

The Dynamic Momentum Index is a variable-period form of the relative strength index. With the document’s default settings, its lookback ranges from 3 to 30 bars. The period shortens as price volatility rises, making the measure more responsive to short-term price moves; in calmer conditions, its period can lengthen. It is read using the same general framework as RSI, with the intended effect of producing signals earlier.

The indicator is attributed to Tushar S. Chande and Stanley Kroll and is described as appearing in their 1994 book, The New Technical Trader. The document says this version follows that original description, but supplies no formula details, chart examples, tests, or evidence that earlier signals improve trading results. Its claims describe the design and intended behavior, not a validated performance advantage.

Key ideas

• The Dynamic Momentum Index is an RSI variant with a lookback period that changes with volatility.
• Its default lookback ranges from 3 to 30 bars.
• Higher price volatility shortens the period and increases responsiveness to short-term movement.
• The indicator is interpreted similarly to RSI and is intended to signal earlier.
• The document provides no test evidence for the claimed timing benefit.

Tags

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