CMO Mean Reversion with Overbought, Oversold, and Time Exits

Summary

This daily mean-reversion strategy uses the Chande Momentum Oscillator (CMO), calculated from the relative sums of positive and negative price changes. It opens a long position when the nine-period CMO falls below -50, treating that reading as oversold. It closes when CMO rises above 50 or when the entry condition has been in effect for at least five bars, which the description presents as a maximum holding period.

The document provides BTC/USDT futures backtest settings spanning several years, but no return, drawdown, or trade statistics, so it does not establish that the rules are profitable. It identifies strong trends, volatile-market false signals, parameter choices, and slippage as risks. The source also uses a separate Boolean position flag and bases the time exit on bars since the buy condition, details that may affect how the stated exit behaves in implementation. A trend filter, volatility-aware parameters, and explicit stop management are suggested as possible refinements.

Key ideas

• CMO compares summed upward and downward price changes over a rolling period.
• The strategy enters long below a CMO reading of -50 and exits above 50.
• A time-based exit is triggered after five bars since the buy condition.
• Strong trends can work against the mean-reversion premise.
• The provided backtest settings do not include performance evidence.

Tags

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