Dynamic Momentum Oscillator Built from RSI Deviation

Summary

The Dynamic Momentum Oscillator, also called DMO or Dynamo, is presented as a momentum indicator derived from the relative strength index. It first calculates RSI on closing prices, then compares that value with its moving average over a second lookback period. The difference is applied around a midpoint of 50, so the oscillator rises when RSI is above its recent average and falls when it is below that average.

The provided configuration uses an RSI period of 14 and a smoothing period of 21, with reference levels at 30, 50, and 70. The author describes the tool as identifying overbought and oversold areas, but gives no tested entry or exit rules, chart examples, or performance evidence. The thresholds are presented without discussion of asset, timeframe, or parameter sensitivity. Traders should therefore treat it as an indicator construction and visualization, rather than as a validated standalone strategy.

Key ideas

• The DMO transforms RSI by measuring its deviation from a moving average of RSI.
• The oscillator is centered around 50, with 30 and 70 shown as lower and upper reference levels.
• The supplied setup uses an RSI lookback of 14 and a dynamic smoothing lookback of 21.
• The document characterizes the indicator as useful for identifying overbought and oversold conditions.
• It provides no evidence that the thresholds produce reliable trades across markets or timeframes.

Tags

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