6m 23s: Lenght

Access the Ultimate Oscillator Indicator via the Forex platform: http://tracking.leadfinance.com/SH3m Join us in the discussion on InformedTrades: http://www.informedtrades.com/1138721-trading-stochastic-momentum-index-indicator.html#post1225129 KEY POINTS REGARDING THE STOCHASTIC MOMENTUM INDEX Introduced by William Blau in 1993 as a faster, less erratic version of the traditional stochastic oscillator Evaluates the Current Close relative to the midpoint of the Recent High/Low Range instead of simply the High and Low, and graphs this value along with a moving average (Stochastic %D) Helps predict turning points and duration of current price move Best used alongside a way to predict trendiness of market (like Chande Momentum Oscillator or R-Squared); like other oscillators, the indicator calculates the direction of an emerging trend, but does not generate reliable signals in a trending market CALCULATING THE STOCHASTIC MOMENTUM INDEX First select a period N; then, determine the center (C) of the range during this period by adding the highest high and lowest low within the period and dividing the sum by 2 C = (HMAX + LMIN)/2 Now subtract this C from the current close (CC) to get D, the "distance": D = CC--C The indicator smooths the distance value twice (DS1 and DS2) with a 3-period EMA: DS1 = EMA(3)(D) DS2 = EMA(3)(DS1) Now smooth the difference between HMAX and LMIN twice (DHL and DHL2), using the earlier EMA, and dividing the second result by 2: DHL = EMA(3)(HMAX -- LMIN) DHL2 = EMA(3)(DHL)/2 We can now calculate today's SMI value: SMI = 100 * (DS2/DHL2) READING THE STOCHASTIC MOMENTUM INDEX An extreme position (approaching -100 or +100) implies the likelihood of a reversal Common trading level: Overbought (bullish) above +40 / Oversold (bearish) below -40 Basic turning point signals: Buy when the indicator rises above -40 from below Sell when the indicator moves below +40 from above Cross-over 1: SMI passes moving average from below = Buy Cross-over 2: SMI falls below moving average from above = Sell (Cross-overs that occur between -15 and +15 are often unreliable) Divergences are uncommon, but can be used to check signals or produce strong signals: Buy for bullish divergence, sell for bearish