Reverse Stochastic Momentum Index

The Reverse Stochastic Momentum Index indicator calculates the specific price levels required for the SMI to reach key thresholds or trigger signal line crossovers. By reverse-engineering the SMI formula, this tool provides traders with precise price targets that will result in momentum shifts, allowing for proactive risk management and entry planning.

Usage

The indicator can be used to anticipate momentum changes before they occur on the oscillator. Key price levels are displayed in an optional info box, showing exactly where the current price needs to move for the SMI to:

• Cross the Signal Line (bullish/bearish crossovers).
• Reach the Zero-Line (trend direction shift).
• Hit Upper/Lower Alert levels (typically ±40).

Traders can interpret the color-coded SMI and signal lines for trend confirmation:

• Bullish: SMI above the signal line (Green) or crossing above the zero-line.
• Bearish: SMI below the signal line (Red) or crossing below the zero-line.
• Overbought/Oversold: Values above +40 or below -40 suggest extended momentum conditions.

Details

The Stochastic Momentum Index (SMI) was developed by William Blau as a more sensitive and reliable version of the traditional stochastic oscillator. It measures the distance of the closing price relative to the median of the high/low range. This specific implementation includes two core reverse functions:

1. Price at Level: Calculates the price needed to reach a user-defined SMI value (e.g., 0, 40, -40).
2. Price at Crossover: Calculates the price required for the SMI to intersect its own EMA-based signal line.

The histogram provides a visual representation of the gap between the SMI and the signal line, with scaling factors available to enhance visibility.

Settings

SMI Properties

• Price Source: The price data used for calculation (default is Close).
• SMI Length: The lookback period for the high/low range.
• Smooth 1 / Smooth 2: The primary and secondary smoothing periods applied to the SMI calculation.

Signal Line Plot Settings

• Show Signal Line: Toggles the visibility of the signal line.
• MA Length: The period for the signal line's moving average.

Histogram Settings

• Show Histogram: Toggles the momentum histogram.
• Histogram Scaling Factor: Multiplier to increase the visual size of the histogram bars.

Scale Settings

• Alert Hi/Lo: Defines the overbought and oversold thresholds (default ±40).
• Show Alert Level Lines: Toggles horizontal lines at the alert thresholds.

Info Box Settings

• Show Info Box: Displays the real-time price levels required for crossovers.
• Decimal Places: Adjusts the precision of the price levels shown in the info box.

FAQ

How do I interpret "Impossible" in the info box?

If the calculated price level required to reach a specific SMI value is mathematically impossible (e.g., negative price), the info box will display "Impossible."

What do the different colors represent?

Green typically indicates bullish momentum (SMI rising or above the signal/zero line), while Red indicates bearish momentum (SMI falling or below the signal/zero line).

How can I access the Reverse Stochastic Momentum Index?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.