Investing & Trading

Price Momentum Oscillator Strategy

By Samantha Baltodano


TL;DR:

The PMO strategy is a stock or index trading approach based on the signals from the Price Momentum Oscillator, which tracks relative momentum through double smoothing with exponential moving averages. A trader considers buying when PMO crosses above its signal line (a third exponential moving average of PMO) and selling when it crosses below.


What Is the Price Momentum Oscillator Strategy?

The PMO Strategy is based on the signals provided by the Price Momentum Oscillator Study. 


The Price Momentum Oscillator is a study developed by Carl Swenlin and is essentially the one-bar rate of change (relative momentum) consequently smoothed by two exponential moving averages. 


The signal line is a third exponential moving average of the double-smoothed rate of change.


In this case, a simple trading system based on the Price Momentum Oscillator technical analysis would say:


  • consider buying when you see PMO crossing above its signals line on a stock chart;
  • consider selling when you see PMO crossing below its signal line on a stock chart.

Test The Price Momentum Oscillator Strategy

Great news! 


You can back test this exact strategy on historical data for any of your favorite symbols using TradingView. 


This strategy has already been built and all you have to do is log in and take it for a spin. You can access this indicator here.


If you’re new to back testing and to TradingView, don’t worry. I created a step-by-step guide you can follow to begin testing the Price Momentum Oscillator.


Summary

  • The PMO Strategy is based on the signals provided by the Price Momentum Oscillator
  • The PMO is a rate of change based study that uses two exponential moving averages to track relative momentum
  • The PMO study includes a signal line, which is a third exponential moving average of the PMO line
  • A trader may consider buying when the PMO crosses above its signal line and selling when it crosses below.

Price Momentum Oscillator is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.


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