Momentum Bias Index: Comparing Smoothed Positive and Negative Momentum
Summary
The Momentum Bias Index estimates directional bias by separating positive and negative momentum, then comparing their strength. Momentum is calculated from the change in closing price over a lookback and normalized by an exponentially averaged high-low range. The indicator aggregates or smooths the positive and negative components, with a Hull moving average option, and presents them as chart overlays or as histograms and lines.
An impulse boundary is formed from the average bias using an exponential average plus a standard deviation adjustment. Signals appear when one side dominates above this boundary while that side is weakening, which the description frames as a potential take-profit cue. Adjustable bias and smoothing lengths change the horizon and responsiveness. The document provides indicator logic and example defaults, but no historical test, performance evidence, or rules for entering trades; its signals therefore describe a visualization concept rather than a validated strategy.
Key ideas
- The index compares separate positive and negative momentum measures to estimate directional bias.
- Momentum is normalized by an exponentially averaged high-low range and can be aggregated or smoothed.
- An impulse boundary uses the average bias and its standard deviation to identify unusually strong readings.
- Signals mark cases where the dominant bias is weakening, which the document presents as a possible profit-taking cue.
- The document supplies indicator rules but no evidence that the signals improve trading results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.