Stochastic Momentum Index (SMI) Indicator
Platform: MT4 Type: Oscillator Last update: September 25, 2024The Stochastic Momentum Index Indicator is a technical analysis gauge that analyzes price momentum. Its calculations are based on the closing price relative to the median range (high-low) of the currency pair price over a specified period. The SMI indicator is considered an improved version of the standard Stochastic Oscillator.
Closer look on the Stochastic Momentum Index Indicator
As we already mentioned, the Stochastic Momentum Index uses the mid-range prices between the High and Low, while the stochastic oscillator is based on the closing prices, thus making the provided signals of SMI more reliable and responsive. If you are not familiar with technical jargon, just take a look at the chart with SMI active on it:
Traders can use the indicator on two occasions:
- Crossover of the SMI lines.
- Divergence between the price and SMI.
These are customizable input available in the settings window:
Buy Signal
In the example below, you can see an example of a buy trade, when the Stochastic Momentum Index indicator is used in conjunction with the 50-period Exponential Moving Average. The MA defines a bullish trend (the price stays above the line), and the trade is triggered on the SMI crossover.
Sell Signal
In the example below, you can see an example of a sell trade, when the Stochastic Momentum Index indicator is used in conjunction with the 50-period Exponential Moving Average. The MA defines a bearish trend (the price stays below the line), and the trade is triggered on the SMI crossover.
