CMI - Complex Momentum Index
Description:
The Complex Momentum Index (CMI) is a comprehensive technical analysis tool designed to provide a multifaceted view of an asset's momentum and trend strength. It combines several key indicators: Relative Strength Index (RSI), Chaikin Money Flow (CMF), and Simple Moving Averages (SMAs) differences, along with the asset's price percentage difference from its SMA. Each component is weighted and normalized, contributing to the overall CMI value, which is then smoothed with a moving average (either SMA or EMA) to provide clear signals.
Guide on How to Use:
Indicator Settings:
RSI Length: Adjust the period over which RSI is calculated.
Source: Choose the price type (e.g., close, open) used for RSI calculation.
CMF Length: Set the period for the CMF calculation.
SMA Lengths: Define two periods for calculating the moving averages and their percentage difference.
Timeframes for SMAs: Select the timeframes for calculating SMA differences and price percentage differences.
Weights: Assign importance to each component (RSI, CMF, SMA differences, and Price:SMA difference) through weights.
CMI MA Settings: Choose the type (SMA or EMA) and length of the moving average applied to the CMI.
CMI Target Matching Settings: Define a target value for CMI and a threshold for highlighting when CMI is near this target.
Understanding the Plots:
CMI: The main line, representing the composite index of momentum indicators.
CMI MA: The moving average of CMI, providing a smoothed trend line.
CMI % Difference from MA: Highlights the divergence between CMI and its moving average, which can signal momentum shifts.
CMF (scaled): A scaled version of the Chaikin Money Flow, indicating buying or selling pressure.
RSI: The Relative Strength Index, showing whether the asset is overbought or oversold.
SMA Difference %: The percentage difference between two SMAs, indicating the trend strength.
Price % Diff from SMA: The asset's price percentage difference from its SMA, showing its position relative to a typical value.
Using CMI for Trading Decisions:
Trend Identification: A rising CMI and CMI MA indicates strengthening upward momentum, while falling lines suggest increasing downward momentum.
Divergence: Look for divergences between the CMI and price. If the price is making new highs/lows but the CMI isn't, it might signal a potential reversal.
CMI Target Match: The background highlights when the CMI matches a specified target within a threshold, which can be used to identify potential entry or exit points.
CMI % Difference from MA: Large deviations from the moving average might indicate overextended prices, suggesting a potential pullback or bounce.
Tips:
The Complex Momentum Index (CMI) is a comprehensive technical analysis tool designed to provide a multifaceted view of an asset's momentum and trend strength. It combines several key indicators: Relative Strength Index (RSI), Chaikin Money Flow (CMF), and Simple Moving Averages (SMAs) differences, along with the asset's price percentage difference from its SMA. Each component is weighted and normalized, contributing to the overall CMI value, which is then smoothed with a moving average (either SMA or EMA) to provide clear signals.
Guide on How to Use:
Indicator Settings:
RSI Length: Adjust the period over which RSI is calculated.
Source: Choose the price type (e.g., close, open) used for RSI calculation.
CMF Length: Set the period for the CMF calculation.
SMA Lengths: Define two periods for calculating the moving averages and their percentage difference.
Timeframes for SMAs: Select the timeframes for calculating SMA differences and price percentage differences.
Weights: Assign importance to each component (RSI, CMF, SMA differences, and Price:SMA difference) through weights.
CMI MA Settings: Choose the type (SMA or EMA) and length of the moving average applied to the CMI.
CMI Target Matching Settings: Define a target value for CMI and a threshold for highlighting when CMI is near this target.
Understanding the Plots:
CMI: The main line, representing the composite index of momentum indicators.
CMI MA: The moving average of CMI, providing a smoothed trend line.
CMI % Difference from MA: Highlights the divergence between CMI and its moving average, which can signal momentum shifts.
CMF (scaled): A scaled version of the Chaikin Money Flow, indicating buying or selling pressure.
RSI: The Relative Strength Index, showing whether the asset is overbought or oversold.
SMA Difference %: The percentage difference between two SMAs, indicating the trend strength.
Price % Diff from SMA: The asset's price percentage difference from its SMA, showing its position relative to a typical value.
Using CMI for Trading Decisions:
Trend Identification: A rising CMI and CMI MA indicates strengthening upward momentum, while falling lines suggest increasing downward momentum.
Divergence: Look for divergences between the CMI and price. If the price is making new highs/lows but the CMI isn't, it might signal a potential reversal.
CMI Target Match: The background highlights when the CMI matches a specified target within a threshold, which can be used to identify potential entry or exit points.
CMI % Difference from MA: Large deviations from the moving average might indicate overextended prices, suggesting a potential pullback or bounce.
Tips:
- Customize the weights and lengths based on the asset and your trading style. Different settings might work better for different market conditions.
- Always confirm signals with additional analysis. No indicator works perfectly in all situations.
- Consider the overall market context and news that might affect the asset's price.
- Practice risk management and use stop-loss orders to protect your investments.
- Decrease the weight of the RSI & MA's to put more emphasis on money flow while keeping that data in the plot.
- Uncheck everything but CMI in the style page for visual clarity (can't do this in code)