Stochastic Momentum Index (SMI)
factor.formula
C(N) =
Calculate the midpoint of the highest price and the lowest price within N periods, which represents the price center within N periods.
H =
Calculate the degree of deviation of the closing price from the N-period price center, reflecting the extent to which the current price deviates from the center.
SH1 =
The deviation H is smoothed by exponential moving average with a period of N1, aiming to filter out short-term noise and extract trend signals.
SH2 =
The smoothed deviation SH1 is again smoothed with an exponential moving average of N2 periods to further smooth out fluctuations and extract trend signals with a longer period.
R =
Calculate the difference between the highest price and the lowest price within N periods, which represents the price fluctuation range within N periods.
SR1 =
The price fluctuation amplitude R is smoothed by exponential moving average with a period of N1, aiming to filter out short-term noise and extract trend signals.
SR2 =
The smoothed price fluctuation range SR1 is smoothed by exponential moving average of N2 periods and then divided by 2 to further smooth and standardize the fluctuation range.
SMI =
Calculate the ratio of the smoothed deviation SH2 to the smoothed volatility SR2 and normalize it by multiplying it by 100. The higher the SMI value, the higher the deviation of the current price from the recent volatility center and the stronger the momentum.
Parameter Description:
- :
Lookback period, used to calculate the price center and fluctuation range, the default value is 10. Represents the time span for examining price fluctuations.
- :
Exponential moving average smoothing period 1, used for preliminary smoothing of deviations and volatility, the default value is 3. Affects the degree of short-term volatility filtering.
- :
Exponential moving average smoothing period 2 is used to smooth the deviation and fluctuation range after smoothing. The default value is 3. It affects the degree of extraction of medium and long-term trends.
factor.explanation
The SMI Stochastic Momentum Index measures the momentum of prices by calculating the degree of deviation between the closing price and the midpoint of price fluctuations within N periods (i.e., the price center), and comparing it with the price fluctuation range within N periods. Through two exponential moving average smoothing, the SMI is able to filter out short-term noise and more clearly reflect the overbought and oversold states of prices and potential reversal signals. When the SMI value is high, it indicates that the price is in a relatively strong position in recent fluctuations, which may indicate overbought or trend acceleration; conversely, when the SMI value is low, it indicates that the price may be in an oversold state or the trend is weakening. Investors can use the numerical and morphological changes of the SMI, combined with other indicators and analysis methods, to assist in judging price trends.