Cumulation of Momentum (COM) Indicator

Cumulation of Momentum Indicator (COM)

The COM measures the cumulative strength of the trend, and is useful in signalling the end of the trend, and potential breakouts.

 

How to use COM to identify potential breakouts?

Case 1:

1. You need an accumulation range (Period of sideways after a trending market)

accumulation range

 

2. Look for a test of zero line of COM indicator before the breakout

accumulation range

3. Wait for the breakout

Case 2:

accumulation range2

Once again, note the 1. prior trend, 2. accumulation range, 3. test of zero line (COM indicator), before the breakout.

Case 3 (unsuccessful example):

accumulation range3

 If we were to follow the earlier rules mechanically (1. prior trend, accumulation range, 3. test of zero line), then yes, we would end up taking this trend. However, if we looked more carefully, the market provided us with some clues against taking this trade.

1. COM has travelled a very long distance to break above the zero line. Comparing this to Case 1 & 2, it is not exactly the same situation. The COM here feels ‘exhausted’ after such a long distance and probably needs to pullback deeper before a breakout can occur

2. The bars after the test of the COM zero line (the bars leading to the breakout) are small, and do not look powerful enough, compared to case 1 & 2. 

 

Conclusion: Apply this indicator to your chart and play around with it. I’m sure following the images above, you will be able to identify your own potential breakout setups. Personally, I also use COM as an indicator to get a feel for the market direction. Is a potential breakout happening soon? Is the current trend ending soon? (Divergence – more on this below)

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How to use COM to identify the potential end of a trend?

To put it simply, divergence + trend line breaks

In stronger trends, there maybe multiple divergences before the trend reverses. In weaker trends, (such as within a trading range, or a pull back within a larger trend), usually 1 divergence is enough

Example 1:

Weaker trend divergences

Example 2:

Stronger trend example

 

So, there you go, a comprehensive guide to trading using the COM indicator. It is my sincere wish that it benefits you greatly in your trading. Drop me a message or leave a comment below if you have questions!

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11 thoughts on “Cumulation of Momentum (COM) Indicator

  1. Pingback: Website & Life Updates 21 Sept 2015 - Abundance Trading Group

  2. Chow Kok Leong

    COM Indicator
    I am a subscriber of Metastock software for Equity. Interested in your COM indicator and wondering whether same principle could be applicable for Equity Markets. Any possible your COM indicator could be written into Metastock software. Please advise.
    Many thanks
    Kind Regards
    Chow Kok Leong from Singapore

    Reply
  3. Linton Post author

    Hi Kok Leong,

    Glad you found this useful. Yes it can be applied to equity markets, which tend to work better because they are more trending.

    I am unsure how to code this in metastock, but if you can code in metastock, I can pass you the MT4 code to convert.

    Cheers

    Reply
  4. Zack

    Hi, I am interested in your COM indicator and wondering if you have the MT4 code or pine script (tradingview) ?

    Thanks
    Zack from Singapore

    Reply
    1. Linton Post author

      Hi Zack, as mentioned to Song Lin below, COM is basically an MACD indicator. You will find both plot almost the same result if you plot MACD over the COM indicator, with 50,10 settings. COM uses exponential MAs while MACD uses simple MAs. If you can plot an MACD on trading view, you should get similar results.

      The source code for this indicator is also attached in the zip file

      Reply
  5. Chua Song Lin

    Hi,

    I am also interested in your COM indicator. Do you know how I can include in TradingView or InteractiveBrokers? Thank you!

    Song Lin

    Reply
    1. Linton Post author

      Hi Song Lin, COM is basically an MACD indicator. You will find both plot almost the same result if you plot MACD over the COM indicator, with 50,10 settings. COM uses exponential MAs while MACD uses simple MAs. If you can plot an MACD on trading view or IB, you should get similar results.

      Reply
  6. Jasper

    Hi Linton,

    Can the COM be used in Thinkorswim?

    I read the above replies from you (with regards to using MACD as an substitute) and would like to clarify the following:
    1. The 50, 10 settings refer to which setting for MACD (fast length/ slow length/ macd length)?
    2. For MACD, do we use simple, exponential or weighted MA?

    Thank you!

    Cheers,
    Jasper

    Reply
  7. Linton Post author

    Dear Jasper,

    This indicator cannot be directly loaded onto Think or swim platform, but if you can code it (hopefully they allow you to write custom code like Metatrader 4), then you will be able to use the same logic on Think or swim.

    The 50, 10 settings refer to which setting for MACD (fast length/ slow length/ macd length)?
    –> 50 (fast length), 10 (slow length). So if you want to replicate MACD using COM, Set COM to 12 (length), 0 (Price), 26 (MaLength), 1 (MaMethod) – (1 being exponential)
    Nonetheless, using the settings I just gave you, you won’t be able to get exactly the same curve as the MACD, but it will be very similar.

    For MACD, please use exponential MA.

    Reply

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