Strength Oscillator

Not knowing when a market will trend is the greatest problem for analyst.

Based on the idea that the trend component is stronger when price is father from fair value, and noise (sideways movement) is greater when price is near value, an oscillator can be created to show the strength of the trend component based on this concept.

As the trend increases, the average change in prices becomes larger relative to the high minus the low range for the day.

During an unusual period, when the market gaps open, it would be possible for the difference in prices to become larger than the daily range.

In a sideways market both the change in the prices and daily range will get smaller, but the net price change over a period should be close to zero.

Zero line cross indicator perfect as a C1 or C2 or perhaps and exit indicator.

The oscillator can be smoothed by increasing the signal period, however this introduces some minimal lag in the signal.

An alternative way would be to smooth the output of the indicator with a least squares moving average of about 8 periods.