Dynamic Momentum Oscillator

Description:

The Dynamic Momentum Oscillator is a statistically-driven momentum tool that goes beyond traditional oscillators. Instead of using raw price, it analyzes the momentum of a DEMA (Double Exponential Moving Average) itself, creating a smoother, more refined signal. Its innovative approach incorporates volatility-weighted z-scoring, allowing the indicator to automatically adjust its sensitivity based on market conditions, helping to identify both the strength and sustainability of momentum shifts.

🔍 How It Works:

DEMA Momentum Core: The indicator first calculates a DEMA of the price. It then analyzes the momentum of this DEMA, effectively creating a "momentum of momentum" measure that filters out market noise.

Volatility-Adaptive Z-Score: The core signal is a statistical z-score, which measures how many standard deviations the DEMA is from its mean. This tells you not just the direction, but the statistical significance of the move.

Dynamic Volatility Weighting: The unique addition is a normalized standard deviation component that weights the z-score. In high volatility periods, this amplifies the signal, making strong trends more pronounced. In low volatility, it provides a more muted, conservative output.

🎯 Interpreting the Oscillator:

Zero Line: The baseline. Momentum is considered neutral here.

Orange Histogram (Above Zero): Indicates bullish momentum. The further the bar extends above zero, the stronger and more statistically significant the bullish momentum.

Purple Histogram (Below Zero): Indicates bearish momentum. The further the bar extends below zero, the stronger and more statistically significant the bearish momentum.

Signal Strength: The height of the histogram bars reflects the combined momentum and volatility, giving you a direct visual gauge of momentum strength.

⚙️ Input Parameters (Group: Core Settings):

DEMA Length: The period for the primary Double Exponential Moving Average.

Standard Deviation Length: The lookback period for calculating volatility and the z-score.

StDev Weight: Controls the influence of volatility on the final signal (0.1 = minimal, 1.0 = maximum). Adjust this to fine-tune the indicator's responsiveness.

By focusing on the statistical properties of price momentum, the Dynamic Momentum Oscillator offers a unique lens for pinpointing high-probability trend continuations and reversals. It's a powerful tool for traders who appreciate quantitative methods.