CMO and Weighted Moving Average Momentum Threshold Strategy

Summary

This strategy derives a bounded momentum measure from price changes and smooths it with a weighted moving average (WMA). The described calculation compares net price change over a lookback with average absolute daily movement, scaling the result to a range around zero. Positive readings indicate upward momentum and negative readings downward momentum; the WMA is intended to reduce noise. The strategy enters long when the smoothed reading exceeds a configurable upper threshold and short when it falls below a lower threshold, with an option to reverse the direction.

The example parameters set both lookbacks to nine and thresholds at positive and negative sixty. The document suggests volume or longer-term trend filters, parameter testing and dynamic stops as possible refinements. It warns that unsuitable settings may create false signals and that choppy conditions can raise turnover and slippage. A BTC/USDT futures test interval is listed, but no results are provided. The supplied source uses threshold states to maintain a position signal; it does not describe a distinct exit rule beyond switching direction when the opposite threshold is reached.

Key ideas

• The CMO-like value normalizes net price change by average absolute movement and scales momentum around zero.
• A WMA smooths the normalized reading before it is compared with upper and lower thresholds.
• Threshold breaches set long or short position states, and a reverse option can invert those states.
• The document identifies false signals, choppy markets and slippage as risks but reports no backtest outcome.

Tags

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