![]() EMA(EMA(…,r),s) – 2nd smoothing – EMA of period s, applied to result of the 1st smoothing.EMA(…,r) – 1st smoothing- exponentially smoothed moving average with period r, applied to:.1/2* – midpoint of q-period price range.SM(price,q,r,s,u) – triple smoothed q-period Stochastic Momentum.sm(price,q)=price-1/2* – q-period Stochastic Momentum.The formula for the stochastic momentum index can be calculated as follows: In contrast, the arrow at the top shows a selling opportunity with potentially overbought conditions. The arrow at the bottom indicates potentially oversold conditions in the chart below, which translates to a buy signal. When the two indicator lines show elevated values (+/-40), it indicates a strong trend leading to potential overbought or oversold market conditions. ![]() The raw %K value is also known as the fast stochastic, while the %D value is the slow-moving stochastic or the “signal line”. Typically, two lines are plotted, the %K line (the blue line in the chart below) and a moving average of the %K, known as the %D (the red line). The indicator normalizes the price of an asset as a percentage between the two extreme values. The SMI displays an oscillator, the stochastic momentum oscillator. How Does the Stochastic Momentum Index Work?
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