Stochastic Momentum Indicator
factor.formula
Center Price (C)
C(N) represents the central price within N periods, which is calculated as the average of the maximum highest price within N periods and the minimum lowest price within N periods. It aims to measure the price center axis within N periods.
Price Momentum (H)
H represents price momentum, which is calculated as the difference between the current closing price and the center price, indicating the degree of deviation of the current closing price from the price center axis within N periods.
Smoothed Price Momentum (SH1)
SH1 represents the price momentum after being smoothed by an N1-period exponential moving average. The exponential moving average (EMA) can focus more on recent data, making momentum more sensitive. SH1 can be considered a smoothed value of short-term price momentum.
Double Smoothed Price Momentum (SH2)
SH2 represents the value after SH1 is smoothed again by the N2-period exponential moving average, which aims to further smooth the price momentum, reduce noise, and make the trend clearer.
Range (R)
R represents the price fluctuation range within N periods, which is calculated as the difference between the maximum value of the highest price within N periods and the minimum value of the lowest price within N periods, reflecting the price fluctuation range within N periods.
Smoothed Range (SR1)
SR1 represents the volatility range after being smoothed by an N1-period exponential moving average. The exponential moving average (EMA) can focus more on recent data and make volatility changes more sensitive. SR1 can be considered as a smoothed value of the short-term volatility range.
Average Smoothed Range (SR2)
SR2 represents the value of SR1 smoothed by the N2-period exponential moving average and then divided by 2. The purpose of dividing by 2 here is to reduce the fluctuation range, so that the SMI value fluctuates between -100 and 100, which is convenient for observation. This value can be regarded as half of the average fluctuation range after smoothing.
Stochastic Momentum Indicator (SMI)
SMI stands for the ultimate Stochastic Momentum Indicator, which is calculated as the double smoothed price momentum SH2 divided by half the average smoothed range SR2, scaled by 100. The SMI reflects the relative position of the current price to the recent range, with higher values indicating that the price is closer to the upper side of the recent range and more likely to be in an overbought state; lower values indicate that the price is closer to the lower side of the recent range and more likely to be in an oversold state.
Default parameters:
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Lookback period, used to calculate the central price and fluctuation range. Usually set to 10, but can be adjusted according to specific circumstances.
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Short-term smoothing period, used to calculate SH1 and SR1, is usually set to 3 and can be adjusted according to demand. The smaller the value, the more sensitive it is to price changes.
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Long-term smoothing period, used to calculate SH2 and SR2, usually set to 3, can be adjusted according to demand, the smaller the value, the more sensitive to price changes.
factor.explanation
The Stochastic Momentum Indicator (SMI) determines the strength of price momentum and overbought or oversold conditions by comparing the current closing price relative to the recent price fluctuation range. The SMI value fluctuates between -100 and 100. When the SMI is positive and high (usually above +40), it indicates that the market may be overbought and there is a risk of price correction; when the SMI is negative and low (usually below -40), it indicates that the market may be oversold and there is a possibility of price rebound. SMI can be used in combination with other technical indicators to improve the accuracy of trading decisions. In addition, it is necessary to pay attention to adjusting the parameters N, N1 and N2 to adapt to different markets and time periods.