Concept
Stochastic Momentum Index
Stochastic Momentum Index is a Momentum & Oscillators concept. The Library holds 5 implementations, each one a working definition you can pull into Quant.
SMI
Top Stochastic Momentum Index indicators
5 total
What is the Stochastic Momentum Index?
The Stochastic Momentum Index (SMI), introduced by William Blau in 1993, relocates the stochastic's anchor point. A standard Stochastic Oscillator asks where the close sits between the period's high and low; the SMI asks how far the close sits from the midpoint of that high-low range, then double-smooths both that distance and the range itself with successive EMAs before dividing. Scaling by half the smoothed range bounds the result near plus and minus 100, with zero meaning the close sat exactly at the range midpoint.
The double EMA smoothing is the point: raw %K can jump between extremes on every bar, while the SMI's numerator and denominator are each smoothed twice, producing a line that drifts rather than snaps. Readings are conventionally judged against plus and minus 40 for overbought and oversold, with a signal-line EMA layered on for crossovers. It shares its double-smoothing DNA with Blau's True Strength Index: one smooths the close's distance from the range midpoint, the other smooths bar-to-bar price change.
How to calculate the Stochastic Momentum Index
The calculation applies the same double smoothing to a distance series and a range series.
- 1Over the lookback window, find the highest high and lowest low; their average is the range midpoint.
- 2Compute the distance: close minus that midpoint. Unlike %K's close-minus-low, this is negative whenever the close is in the lower half of the range.
- 3Smooth the distance with an EMA, then smooth the result with a second EMA; apply the identical double smoothing to the high-low range.
- 4Divide the double-smoothed distance by half the double-smoothed range and multiply by 100, giving a reading near the plus/minus 100 bounds; an EMA of the SMI serves as the signal line.
How traders use it
- For overbought/oversold reversion: readings beyond plus or minus 40 mark stretch, with entries commonly waiting for the SMI to hook back toward zero rather than fading the first touch.
- For signal-line crossovers, which fire less often than standard stochastic crosses because both lines are already double-smoothed.
- For zero-line context: above zero, closes are persistently in the upper half of their recent range, a trend-quality read as much as a momentum one.
- For divergence at swing extremes, where the smoothing makes peaks easier to compare, at the cost of signals arriving later than the raw stochastic's.
Stochastic Momentum Index vs. related oscillators
Stochastic Oscillator: The stochastic anchors to the period low and lives on a 0-100 scale; the SMI anchors to the range midpoint, centers at zero, and double-smooths everything, so it turns later but whipsaws less.
True Strength Index: Blau siblings with different inputs: TSI double-smooths bar-to-bar price change, while the SMI double-smooths the close's distance from the range midpoint. TSI reflects momentum's persistence; SMI reflects position within the recent range.
Williams %R: %R is the stochastic's mirror (close measured from the period high, scaled 0 to -100) with no smoothing at all, making it the fastest and noisiest of the family; the SMI sits at the opposite, heavily smoothed end.
Related concepts · Stochastics
Concept family
Momentum & Oscillators
91 concepts mapped · 72 in the Library
Stochastic Momentum Index FAQ
What is the difference between the SMI and the Stochastic Oscillator?
Two things: the anchor and the smoothing. %K measures the close relative to the period low and ranges 0 to 100 with no natural center. The SMI measures the close relative to the range midpoint, so it is centered at zero, and it double-smooths numerator and denominator with EMAs, trading %K's speed for fewer whipsaws.
What are the overbought and oversold levels for the SMI?
Plus 40 and minus 40 are the conventional bands, on a scale bounded near plus and minus 100. As with any oscillator threshold, they mark stretch, not reversal: in strong trends the SMI can hold beyond 40 for long stretches, so many traders require a hook back through the band or a signal-line cross before acting.
Who created the Stochastic Momentum Index?
William Blau, who introduced it in 1993 in Technical Analysis of Stocks & Commodities. It belongs to his double-smoothing family alongside the True Strength Index: in both, a raw momentum quantity and its normalizing denominator are each smoothed twice with EMAs before dividing, which suppresses noise while keeping the ratio's scale stable.
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