Intraday momentum index (IMI): a trader’s guide

The intraday momentum index (IMI) applies RSI-style maths to each candle's open-to-close move. This guide explains how it works, how traders interpret it and where its limits lie.

What is the intraday momentum index?

The intraday momentum index (IMI) is a momentum oscillator that compares bullish and bearish candle bodies over a set number of periods (New York Public Library, 1994).

The reading ranges from 0 to 100:

• Higher values indicate that bullish candle bodies outweighed bearish ones over the lookback.
• Lower values indicate that bearish candles outweighed bullish ones over the period.

What 'intraday' means in IMI

Here, 'intraday' refers to the move within each candle, from its open to its close. It does not mean the IMI can only be used on sub-daily timeframes.

The calculation adapts to the chart interval. For example:

• On a daily chart, it measures each session's open-to-close move
• On an hourly chart, it measures the move within each hour
• On a weekly chart, it measures the move from the week's open to its close

The IMI excludes overnight gaps – the move between one candle's close and the next candle's open – meaning it may not be effective in certain markets and conditions.

Why ignoring the overnight gap matters

Research suggests returns during trading hours and returns between sessions do not always behave in the same way.

• Kenneth French and Richard Roll noted in 1986 that ‘Asset prices are much more volatile during exchange trading hours than during non-trading hours’ (CaltechAUTHORS, 1986)

• Later research by Dong Lou, Christopher Polk and Spyros Skouras examined intraday and overnight components of stock returns and trading strategies. Their findings suggested that the two periods can show different, and sometimes opposing, return patterns (ScienceDirect, 2019).

So an indicator based only on open-to-close movement can tell a different story from one based on closing prices, particularly in markets where opening gaps are common. Neither view is necessarily more informative on its own; they measure different parts of the price move.

How is the IMI calculated?

The IMI measures the size of bullish and bearish candle bodies over a chosen lookback period, then expresses the balance as a value from 0 to 100.

The IMI formula

The calculation covers the chosen lookback, commonly 14 candles. A candle that closes exactly at its open adds nothing to either total.

Past performance is not a reliable indicator of future results.

Hypothetical example of IMI in trading

Consider a five-candle lookback on a hypothetical daily chart:

The bullish bodies total 1.90 and the bearish bodies 0.10:

An IMI of 95 shows that bullish candle bodies dominated the sample. Yet the closing price fell from 100.60 to 97.80.

Each session opened below the previous close, while four of the five then rose from open to close. The IMI captures those intraday rises, but not the gaps lower.

Conversely, a market could repeatedly gap higher before falling during each session. In that case, closing prices might rise overall while the IMI remains low.

Reading the IMI in context

The IMI should be read in context: a high reading does not necessarily mean the broader price trend is rising, just as a low reading does not necessarily mean it is falling.

RSI would capture those gaps because it compares one close with the next.

How to read the IMI

You can read the IMI in several ways, including:

1. The 70 and 30 reference levels
2. The 50 midline
3. Divergence

1. The 70 and 30 levels

• A reading above 70 means bullish candle bodies have outweighed bearish ones over the lookback. Some traders interpret this as stretched buying within the measured periods.
• Below 30 shows bearish bodies have dominated, which some interpret as stretched selling.

Neither level marks a reversal by itself. The IMI can stay above 70 or below 30 while a trend continues.

2. The 50 midline

• A reading above 50 means bullish candle bodies outweigh bearish ones over the lookback. The further above 50, the stronger the bullish imbalance.
• A reading below 50 means bearish candle bodies outweigh bullish ones. The further below 50, the stronger the bearish imbalance.
• A move through 50 shows that the balance has shifted: above 50 favours bullish bodies; below 50 favours bearish ones.

This can help show how open-to-close momentum is changing, but it does not indicate with certainty what price will do next.

3. Divergence from price

Divergence is when price and the IMI move in opposite directions.

• If price makes a lower low while the IMI makes a higher low, bullish bodies may be strengthening despite lower closes, although negative gaps can produce the same pattern.
• If price makes a higher high while the IMI makes a lower high, bearish bodies may be strengthening despite higher closes, with positive gaps potentially explaining the divergence.

Checking the gaps can help show whether the divergence comes from intraday movement or price changes between sessions.

Different types of IMI settings

The IMI’s main input is its lookback period. Each setting defines the number of candles included in the calculation and provides a different context.

14 periods

Fourteen periods is a common IMI setting and the default on many charting platforms.

A 14-period IMI uses the latest 14 candles. On a daily chart, that means 14 trading sessions; on an hourly chart, 14 hours. It is a reference setting rather than an inherently optimal one, and different lookbacks will change how quickly the indicator responds.

Shorter lookbacks, around 5–10

Shorter settings include fewer candles, giving each candle more influence on the reading. The IMI responds more quickly, but individual candles can move the reading more sharply and extreme values may occur more often.

Longer lookbacks, around 20 and above

Longer settings involve more candles. A larger number of candles can reduce the influence of a single period, but can result in a slower response to price moves.

IMI in trading: a hypothetical example

The following hypothetical example shows how the IMI can be read alongside other price information. It does not constitute financial advice or a recommendation to trade.

A share has risen for several weeks on a daily chart before pulling back over five sessions. The 14-period IMI falls from 68 to 31.

Most of the decline happens within the sessions rather than through opening gaps, while RSI falls by a similar amount. This suggests the pullback appears in both intraday and close-to-close data.

Price has also returned to the area of an earlier breakout, which some traders may monitor as potential support.

If later sessions close above their opens and the IMI moves back above 50, bullish intraday momentum has strengthened. Conversely, if sessions continue closing below their opens and price moves below the previous breakout area, the IMI would continue to reflect bearish intraday momentum.

Neither outcome is implied in advance. The IMI reflects historical open-to-close price behaviour; it does not determine where price will move next.

A trader may also define what price movement would invalidate the setup they are assessing. A stop-loss can limit losses, but standard stop-loss orders are not guaranteed. Guaranteed stop-loss orders incur a fee if activated.

Gaps and periods of higher volatility can move price quickly, so no single risk-management tool removes trading risk.

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IMI vs RSI

The IMI and the relative strength index (RSI) share a similar framework, but each measures a different part of the price move.

• RSI compares each close with the previous close.
• IMI compares each close with the same candle's open.

While RSI measures price movement between closes, the IMI focuses on what happened within each candle.

Compare IMI and RSI using the table below:

When IMI and RSI move in broadly the same direction, intraday and close-to-close price behaviour tell a similar story.

When they diverge, gaps may explain part of the difference. A high IMI alongside falling closes can point to weakness between sessions and stronger movement after the open. A low IMI alongside rising closes can reflect the opposite pattern.

Neither measure is inherently more useful. They answer different questions.

Past performance is not a reliable indicator of future results.

Tools that can add context to the IMI

Because the IMI only measures open-to-close movement, other tools can help show what happens outside that window.

A close-to-close oscillator

• Comparing RSI with the IMI separates intraday movement from close-to-close movement.
• If both move in a similar direction, the two measures broadly agree. If they diverge, gaps may be contributing to the difference.

Gap analysis

• Marking each session's open against the previous close shows how much movement occurs between sessions.
• Positive gaps can lift closing prices even if candles tend to fall intraday. Negative gaps can push closing prices lower even when individual sessions tend to rise.

Candlestick patterns

• The IMI combines candle bodies across a lookback period. Individual candlesticks show what happened in a particular session.
• A large bullish or bearish body, for example, may explain a sudden change in the IMI more clearly than the oscillator reading alone.

Average true range (ATR)

• Average true range (ATR) includes gaps in its measure of price range; the IMI does not.
• If ATR rises while the IMI changes little, larger gaps, wider intraday ranges or both may be driving the increase in volatility. ATR does not indicate direction.

IMI: potential limitations and risks

The IMI has several limitations to keep in mind:

• It ignores gaps. The IMI can read high while closing prices fall, or low while they rise. This may matter less in markets that trade almost continuously, such as major currency pairs, and more in shares or indices that can reopen at a different price.
• Individual candles can move the reading sharply. The standard IMI uses simple sums, so a large candle can noticeably affect the reading when it enters the lookback and again when it drops out.
• Extreme readings can persist. A reading above 70 or below 30 shows an imbalance between bullish and bearish candle bodies. It does not mean a reversal is due, and sustained trends can keep the IMI near an extreme.
• Leverage increases risk. CFDs are leveraged products, so relatively small market moves can produce larger gains or losses relative to the capital committed. Gaps can add further risk if price reopens before a position can be adjusted.

Position size, leverage, liquidity and possible gaps are among the factors traders may consider as part of broader risk management.

Past performance is not a reliable indicator of future results.

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