Strength momentum index v2

The Strength momentum index v2 indicator is a multi-timeframe oscillator designed to identify trend direction and potential reversal points by analyzing price momentum across three distinct lookback periods.

Usage

The Strength momentum index v2 can be used to gauge the current market sentiment based on the relationship between short-term, mid-term, and long-term momentum. Traders can look for the following signals:

• Trend Direction: The oscillator color changes based on the alignment of momentum. A green color indicates bullish alignment (short > mid and short > long), while red indicates bearish alignment (short < mid and short < long). Blue indicates transitional phases.
• Overbought/Oversold: The levels at 80 and 20 serve as standard thresholds. A cross above 80 suggests the asset may be overextended to the upside, while a cross below 20 suggests it may be overextended to the downside.
• Mean Reversion: The 50-level acts as a midline. Crossovers of this level or the interaction between the short and mid-term momentum lines can signal shifts in the intermediate trend.

Details

The script calculates momentum using the Relative Moving Average (RMA) of positive and negative price changes, similar to the logic found in the Relative Strength Index (RSI). It computes three separate values:

1. Short: Captures immediate price fluctuations.
2. Mid: Represents the intermediate trend.
3. Long: Represents the primary underlying trend.

The final "SMI" value plotted is the Short-term calculation, but its color is dynamically adjusted by comparing it to the Mid and Long-term values to provide a comprehensive view of trend synchronization.

Settings

• Source: The price data used for calculation (default is OHLC4).
• Short term bars: The lookback period for the short-term momentum calculation.
• Mid term bars: The lookback period for the mid-term momentum calculation.
• Long term bars: The lookback period for the long-term momentum calculation.

FAQ

How do I interpret the color changes on the SMI?

The colors represent the hierarchy of momentum. Green indicates the short-term momentum is above both mid and long-term values (Bullish). Red indicates it is below both (Bearish). Blue represents a mix or transition where the trends are not fully aligned.

Can I use this for alert conditions?

Yes, the script includes alert conditions for overbought/oversold levels and bullish/bearish crossovers between the short and mid-term momentum values.

How can I access the Strength momentum index v2?

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