SMI Technical Analysis & SMI Signals

Developed by William Blau.

The SMI indicator is an adaptation of the classic Stochastic Oscillator Trading indicator which smoothes out the stochastic trading indicator oscillations.

SMI Technical Indicator - SMI Indicator Technical Analysis - SMI Best Indicator Combination

Construction of SMI

This technical indicator is calculated by comparing the price relative to average of an n-number of periods.

Then instead of plotting these values directly, smoothing using an Exponential Moving Average is applied & then the values drawn to form the SMI.

When the closing price is higher than the average of the range, the SMI will move up.

When the closing price is less than the average of the range, the SMI will move downward.

This oscillator ranges between the values of +100 and -100, this indicator also is less prone to whipsaw fakeouts compared to the stochastic oscillator.

XAU/USD Technical Analysis and Generating Signals

Buy & Sell Trading Signals/ Cross over Signals

The SMI can be used to generate buy and sell trade signals using the method shown below, Buy when the SMI is heading upwards & sell when its heading downward.

Buy and Sell Trading Signals Crossover Signals - Generating Signals

Buy & Sell Trading Signals/ Crossover Signals

Overbought/Oversold Level Trading Cross-overs

Overbought levels above +40
Over-sold levels below -40

Buy signal is generated/derived when this oscillator falls below over-sold level and then rises above this technical level & starts and begins to move upwards.

Sell Signal is generated/derived when this oscillator rises above overbought level and then falls below this technical level & begins to move downward.

Divergence XAUUSD

The example shown below shows a bearish classic divergence between the price & the SMI. When the SMI showed this divergence the market trend reversed and started to move in a downwards direction.

Divergence Gold: How to Spot Divergence Setups on Charts and How Do I Trade Divergence Trading Setups

Bearish Trade Divergence

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