Stochastic Momentum Index - indicator for MetaTrader 5

Stochastic Momentum Index - indicator for MetaTrader 5

The Stochastic Momentum Index (SMI) was developed by William Blau and was introduced in the January 1993 issue of Technical Analysis of Stocks & Commodities magazine.

It incorporates an interesting twist on the popular Stochastic Oscillator. While the Stochastic Oscillator provides you with a value showing the distance the current close is relative to the recent x-period high/low range, the SMI shows you where the close is relative to the midpoint of the recent x-period high/low range.

The result is an oscillator that ranges between +/- 100 and is a bit less erratic than an equal period Stochastic Oscillator.

  • When the close is greater than the midpoint of the range, the SMI is positive.
  • When the close is less than the midpoint of the range, it is negative.

The interpretation of the SMI is virtually identical to the Stochastic Oscillator.

Three popular methods include:

  • Buy when the SMI falls below a specific level (e.g., -40) and then rises above that level, and sell when the Oscillator rises above a specific level (e.g., +40) and then falls below that level.

    However, before basing any trade off of strict overbought/oversold levels it is recommended that you first qualify the trendiness of the market using indicators such as r-squared or Chande Momentum Oscillator. If these indicators suggest a non-trending market, then trades based on strict overbought/oversold levels should produce the best results. If a trending market is suggested, then you can use the oscillator to enter trades in the direction of the trend.

  • Buy when the SMI rises above its signal line (dotted) line and sell when the SMI falls below the signal line.

  • Look for divergences. For example, where prices are making a series of new highs and the SMI is failing to surpass its previous highs.

Mr. Blau also notes that a 1-day SMI (with large smoothing periods such as 100) is very sensitive to the close relative to the high and low of the day.

Download Stochastic Momentum Index - indicator for MetaTrader 5

Related News

Latest News
UBS Sees Risk of Swiss Recession If Virus Hits Europe Hard
26.02.2020 17:18
(Bloomberg) -- Switzerland faces the risk of a recession if the coronavirus outbreak leads to quarantines or businesses closures in Europe, according to UBS Group AG. Europe is already on high alert amid a rise in cases, with Italy forced to put some of the country into lockdown. While supply chain disruptions in Asia probably won’t have a major
Read more
Retail Sales to Overcome Uncertainties Like Coronavirus to Rise in 2020
26.02.2020 17:15
By Kim Khan – U.S. Retail sales will continue to climb this year, overcoming uncertainty due to the coronavirus, trade wars and the presidential election, the National Retail Federation said Wednesday. Sales will rise 3.5% to 4.1% to between $3.93 trillion and $3.95 trillion in 2020, the NRF said. Online sales will be up
Read more
U.S. retail sales expected to cross $3.9 trillion in 2020: NRF
26.02.2020 17:12
(Reuters) - U.S. retail sales are expected to rise between 3.5% and 4.1% to more than $3.9 trillion this year, the National Retail Federation (NRF) said on Wednesday, despite fears surrounding the coronavirus outbreak. The trade body expects sales to be between $3.93 trillion and $3.95 trillion, citing steady wage growth and consumer confidence
Read more
Enel agrees on need to provide Italy with ultrabroadband network
26.02.2020 17:09
MILAN (Reuters) - Italy's Enel (MI:ENEI) said on Wednesday it agreed on the need to provide the country with an ultrabroadband network, after Economy Minister Roberto Gualtieri urged parties involved in the plan to find an agreement. Open Fiber, jointly owned by utility Enel and state lender CDP, is spending billions of euros to build an
Read more
Climate change could add around $100 billion to costs of extreme weather
26.02.2020 17:06
LONDON (Reuters) - Climate change could add around $100 billion, or more than 20%, to the global cost of extreme weather events such as floods, heatwaves and droughts by 2040, research from Cambridge University showed on Wednesday. The findings come from the university's Climate Change Business Risk Index, which uses climate modeling data to
Read more