Stochastic Momentum Index (SMI) of Money Flow Index (MFI)

The Stochastic Momentum Index (SMI) of Money Flow Index (MFI) indicator provides a comprehensive view of market strength and price direction by calculating momentum based on volume-weighted buying and selling pressure. By applying the SMI formula to the MFI instead of price, this tool filters noise and highlights momentum shifts rooted in liquidity flows.

Usage

The Usage section focuses on identifying trend reversals and momentum exhaustion through signal crossovers and divergences.

• Signal Crossovers: A primary signal occurs when the SMI line crosses the signal line. Crossovers above -40 are typically interpreted as bullish momentum building, while crossovers below +40 suggest bearish momentum.
• Divergences: Traders should monitor the relationship between price action and the SMI MFI. A rising price accompanied by a falling SMI MFI (negative divergence) indicates waning strength and a potential reversal. Conversely, a falling price with a rising SMI MFI (positive divergence) indicates building strength.
• Dynamic Zones: The indicator features dynamic overbought and oversold zones that adjust based on historical sample data, helping to identify extreme market conditions relative to recent volatility.

Details

This indicator combines two powerful concepts: the Stochastic Momentum Index and the Money Flow Index. The SMI is traditionally an enhancement of the standard Stochastic Oscillator, measuring where the close is relative to the midpoint of the high/low range. By substituting price with the Money Flow Index (MFI), the script measures momentum based on volume-driven pressure. This implementation includes multi-timeframe (MTF) support, allowing users to view momentum from higher timeframes while maintaining visual smoothness on the current chart.

Settings

• HTF Selection: Choose between a fixed timeframe or a multiplier of the current chart timeframe.
• MTF Smoothed Mode: When enabled, smoothes the transitions between higher timeframe bars to avoid step-like visual artifacts.
• MFI Length: The lookback period for the underlying Money Flow Index calculation.
• SMI K% Length: The length for the first smoothing of the Stochastic Momentum Index.
• SMI D% Length: The length for the second smoothing of the SMI.
• Signal Length: The smoothing period used to generate the signal line from the SMI.
• Type of Smoothing: Allows users to select from various moving average types (EMA, SMA, HMA, JMA, etc.) for both the SMI and its signal line.
• Dynamic Zones Sample Length: The lookback period used to determine the percentile-based dynamic overbought and oversold levels.

FAQ

How do I use the signal line crossovers?

You can look for the SMI line crossing above its signal line when it is in oversold territory (typically below -40) as a potential long entry, or crossing below the signal line in overbought territory (above +40) for a potential short entry.

What is the benefit of using MFI as the source?

Using MFI as the source instead of price integrates volume data into the momentum calculation. This helps confirm whether price moves are supported by significant buying or selling pressure.

How can I access this indicator?

You can access the Stochastic Momentum Index (SMI) of Money Flow Index (MFI) on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.