John M Oscillator with Zero-Cross Range Scaling

## John M Oscillator with Zero-Cross Range Scaling - How It Works

### Core Concept
This oscillator measures momentum by comparing the current closing price to a smoothed opening price (calculated as the average of the previous candle's opening and closing prices), then scales that signal based on recent market volatility. This makes the strength readings relative to recent price action rather than absolute values.

### How It Calculates

**Step 1: Modified Opening Price**
- Takes the previous candle's opening and closing prices and averages them together
- This creates a smoother reference point that reduces noise compared to using raw opening prices

**Step 2: Basic Oscillator Value**
- Subtracts this smoothed opening price from the current closing price
- If close is above the smoothed open = positive momentum
- If close is below the smoothed open = negative momentum

**Step 3: Smoothing**
- Applies an Exponential Moving Average (default 5 periods) to reduce noise and false signals

**Step 4: Dynamic Scaling**
- Finds the last two times the oscillator crossed above/below zero
- Identifies the largest price range (high to low) of any candle between those zero crossings
- Scales the oscillator as a percentage of this largest range, multiplied by 100

### How to Use It

**Signal Interpretation:**
- **Zero Line Crosses**: When the oscillator crosses above/below zero, it suggests potential trend changes
- **Magnitude**: The percentage reading shows strength relative to recent volatility
- Values near +/-100 indicate extreme moves relative to recent price action
- Values near +/-50-70 suggest moderate momentum
- Values near zero suggest weak momentum or consolidation

**Key Levels:**
- **±80-100**: Potential overbought/oversold zones (relative to recent volatility)
- **±70**: Strong momentum zones
- **±50**: Moderate momentum zones
- **Zero**: Trend transition zone

**Trading Applications:**
- **Trend Entries**: Look for zero line crosses in the direction of the broader trend
- **Reversals**: Watch for extreme readings (±80-100) followed by divergence with price
- **Momentum Confirmation**: Higher percentage readings confirm stronger moves
- **Avoiding Fakeouts**: The scaling helps distinguish between significant moves and normal noise

**Advantages of the Scaling Method:**
Unlike traditional oscillators that use fixed overbought/oversold levels, this indicator adapts to current market conditions. A reading of +80 means the current momentum is 80% as strong as the biggest price move since the last trend change, making it more contextually relevant than absolute price comparisons.