Real author:
Daniel Fernandez
Indicator values are in the range 0-100. The greater is the indicator value, the greater is the market stability, so the more likely we have trend. The smaller is the indicator value – the less probable the trend is.
Calculation formula:
CMI = ((ABS(Close[0]-Close[n]))/(MaxHigh[n]-MinLow[n]))*100
Where:
- ABS – absolute value
- Close[0] – last close
- Close[n] – close N bars ago
- MaxHigh[n] – maximal value of High for the N bars period
- MinLow[n] – minimal value of Low for the N bars period
Tips:
Trading on unstable market:
- Buy, when moving average (blue line) of the CMI indicator is below 40 and the histogram is red.
- Sell when moving average (blue line) of the CMI indicator is below 40 and the histogram is green.
- Close positions when CMI histogram is above 50.
Trading on trend market:
- Buy when moving average is above 60 and the histogram is green.
- Sell when moving average is above 60 and the histogram is red.
- Close positions, when CMI histogram is below 50.
This indicator can be used as a filter in trend trading strategies.