Stochastic Momentum Index Technical Analysis SMI MT5 Indicator

Created by William Blau.

The Stochastic Momentum Index, SMI is an adaptation of the classic Stochastic Oscillator Trading Indicator MT5 Indicator that smoothes out the stochastic oscillations.

Stochastic Momentum Index MT5 Indicator - Stochastic Momentum Index MetaTrader 5 Technical Analysis

Construction of Stochastic Momentum Index Indicator

This MT5 indicator is calculated by comparing the currency price relative to the average of an n number of periods.

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

When the closing price is greater than the average of the range, the SMI will move upwards.

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

This oscillator MT5 indicator MT5 indicator ranges between the values of +100 and -100, this MT5 indicator also is less prone to whipsaws compared to the stochastic oscillator trading indicator.

Technical Analysis & Generating Signals

Buy & Sell Signals/ Cross over Signals

The Stochastic Momentum Index can be used to generate buy & sell trade signals using the method shown below, Buy when the SMI is moving upward & sell when its moving downwards.

Buy and Sell Signals Crossover Signals - Stochastic Momentum Index MT5 Technical Analysis - SMI MT5 Indicator

Buy and Sell Signals/ Crossover Signals

Overbought/Oversold Level Cross overs

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

Buy signal gets generated when this oscillator MT5 indicator MT5 indicator falls below oversold level and then rises above this level and starts to move upwards.

Sell Signal is generated when this oscillator MT5 indicator MT5 indicator rises above overbought level and then falls below this level and starts to move downwards.

Divergence Trading

The example below shows a bearish classic divergence between the price & the SMI. When the Stochastic Momentum Index showed this divergence the market trend reversed & started to move in a downward direction.

Bearish Divergence Stochastic Momentum Index Indicator - SMI MT5 Indicator

Bearish Trade Divergence Setup

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