You see, the CMO indicator also has overbought and oversold zones like many other oscillators. CMO value below the negative 50 is considered as oversold, and the CMO value above positive 50 is considered as overbought. And if you have been trading even for a little while, you can tell that if there are overbought and oversold zones, many traders will like to trade when the price reaches or comes out of these zones. That CMO strategy was no different. You buy when the CMO line breaks above the oversold level, which in this is below negative 50. And sell when the CMO line breaks below the overbought level, which is positive 50. In the first attempt, when I took 100 trades with this Overbought Oversold strategy, it only had a 43 percent approximate win rate. 43 percent is not bad because of the 1.5 to 1 reward risk ratio, and this strategy made money in the Trading Rush App. But when I took another 100 trades, but this time by changing one simple thing, it got a 51 percent approximate win rate with a 1.5 to 1 reward risk ratio. 43 to 51 is a huge improvement when it comes to trading strategies. Here’s what I changed. Instead of using the indicator as an oversold and overbought indicator, I used it to find the momentum change using its zero line. I have explained this strategy in the previous CMO video, check it out to learn more. 

 

But why did the CMO indicator performed better with this one simple change? If we look at the Trading Rush App, we will see that the oversold overbought strategy, made a profit of 750 after 100 trades, and on the other hand, the zero line strategy made a profit of 2750. But if we look at the profit graph, you will notice the difference. The zero line strategy gives more signals in a short amount of time, but since this is a momentum oscillator, in a good trend, the zero line strategy gave more signals that were won. On the other hand, the oversold overbought strategy didn’t give many signals in the good trends, because for the price to be oversold or overbought, the price has to make a good move in that direction.

 

For example, these are two downtrend charts. As you can see on the left, the Oversold Overbought strategy only gave one entry signal. But on the right, the zero line strategy gave 6 signals in the same trend. The price has a higher probability of moving in the direction of the trend. Even though 3 trades were lost and three trades were won, because of the  1.5 to 1  reward risk ratio, in total we made money with the zero line strategy in this downtrend.

 

And because of trades like these, the zero line strategy didn’t make a loss like the loss we see in the profit graph of the overbought oversold strategy. If few trades were lost in the bad market, some trades made money in the same market. The zero-line strategy was okay in the sideways and slow market, and was excellent in the trending markets compared to the overbought oversold strategy. 

 

4.5+7.5+4+4+4.5

 

If we come to the Trading Rush Website, you will see that the first oversold overbought strategy gets a TR Score of 24.5 out of 50, and ranks 20th from the top, just above the Williams Percent Range trading strategy.

 

 

6+7.5+4+4.5+4.2

 

And the Zero line strategy that got a better win rate, gets a TR Score of 26.2 out of 50, and ranks 19th from the top, below the RSI with Super Trend trading strategy. That’s all!