Chande Momentum Oscillator Explained // indicator strategy settings // With David Moadel
welcome to looking at the markets with David Modell I'm on a mission to cover
every popular and even not so popular indicator in what I call the indicator
verse okay I just made that up I should probably copyright that okay so
in the indicator versi of a lot of indicators I've covered practically all
of them and I have a playlist with a lot of videos on MACD and RSI and
stochastics and Bollinger Bands & just practically all of them so feel free to
click on the link in the description below this video to check out the
playlist where I cover all those indicators I've got big in beginner
videos more advanced stuff cool stuff so by all means check that out watch all of
them if you want to and if you have the time alright so this is one of the more
obscure ones it is the shun de momentum oscillator that's a cool name right and
it's a lot like the stochastic so if I had to compare it to one I would compare
it to stochastics you know how stochastics has like the over sold level
is below 20 and the overbought level is above 80 on the default settings at
least or RSI right RSI has oversold below 30 overbought is above 70 again
that's the default settings you can always change them well for the shun de
momentum oscillator and it is an oscillator meaning that it bounces up
and down between two boundaries okay and it never really breaks out of those
boundaries it's not like Bollinger Bands that could theoretically go up forever
or go down forever okay or at least until it you know that the stock goes to
zero so whereas an oscillator just kind of bounces back and forth between two
boundaries over and over alright so this is an oscillator and the over on the
default settings the oversold level is if it goes below negative 50 and the
overbought level is if it goes above positive 50 and
mid line is zero all right so I compared this to stochastics and RSI and that
kind of thing because like stochastics and RSI what you see is an overbought
and oversold indicator if you choose to use it that way as well as a momentum or
trend indicator because if it's training upwards then probably the stock or you
know cryptocurrency Forex commodity whatever whatever it is that you're
trading I'll just say stock for now to keep it simple
if the oscillator is trending upwards then probably the stock is trading
upwards if the oscillator is trending downwards then probably the moment the
momentum or the trend of the stock is downwards and so you might want to look
out right watch out when this thing is going sharply downwards so how can you
use it well as an overbought oversold indicator you can do what a lot of
people do with these stochastics for example and the RSI you can wait until
it goes down into oversold territory which would be below the negative 50
here on the default settings and then wait until it pops decisively breaks or
pops back above and out of the oversold territory so if it goes below negative
50 and then decisively clearly breaks back above it that could be a buy signal
all right because then you're using both the over bought oversold and you're
using the momentum indicator because you you don't want to buy a you don't want
to catch a falling knife okay so you're waiting until it the trend is back
upwards okay so it's a trend indicator you're waiting until the momentum is
back upwards hopefully so you're buying it fairly cheaply because it just broke
out of oversold right but the trend is hopefully back upwards that's the idea
but it doesn't always work this is an example of it not working okay and this
is a I'm on trading view calm I want to give them a credit for their charts and
this is a one-minute candlestick chart of Home Depot stock and as you can see
it went the the oscillator went into oversold
but then decisively broke back above it he could have bought here and you would
have not done too well because it just kept going down and so this is not a
perfect not a perfect indicator guess what there is no perfect indicator you
have to make your own decisions or you can combine this with another indicator
or moving averages or whatever and speaking of moving averages what some
people do they do it like people do with stochastics a lot of the time or MACD
where they they place a signal line right on top of the of the indicator
okay so what some people do is they might take a 10 period moving average
and overlap it right on top of the oscillator okay and so they use that as
a signal line and then if the the sean day line crosses above its signal line
that could be bullish you might want to get in and then if it breaks back below
the signal line like it you know 10 period moving average on top of it
whatever if it breaks back below that then that could be a time to sell your
shares or whatever I mean again it's up to you how you use it
but that's how a lot of people might use a signal line on top of the Shawn Day
momentum oscillator just like people do with stochastics just like people do
with MACD because those both often have signal lines attached to them or you can
attach them if you want to you can use it that way and just like with
stochastics RSI and so on you can look for divergences okay so if you see the
stock itself going in one direction and yet the oscillator is going a different
direction like you know here you might say oh the you know the stock
candlesticks are going upwards but meanwhile the the oscillator itself the
indicator is going in the opposite direction it's going downwards and so
you might say oh look out okay maybe don't buy it because you might say the
candlesticks are lying the indicator is telling the truth you know you're kind
of looking underneath the hood so to speak to see what's really going on
there that's another way to look at it okay so so many ways to use this I just
want to give you an introduction to the Shan day momentum oscillator hope
this is helpful to you please give this video a thumbs up if you think that it
was helpful and leave a comment do you like this indicator is it better than
RSI hmm is it better than stochastics better than MACD can use it with other
things what do you think leave a comment go for it why not I like to talk to you
guys it's really fun for me and enjoyable and I like helping you guys
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together trading or investing plan because you got to have one if you don't
have one already otherwise you're just setting yourself up for failure if you
don't have a plan if you don't if you fail the plan you're just planning to
fail excuse me alright so I'm losing my voice I'm gonna stop this video now
thanks a lot guys I appreciate it I'll talk to you again soon
you