Krypton Fear & Greed

The Krypton Fear & Greed indicator provides a visual representation of market momentum and potential reversal zones by utilizing the Stochastic Momentum Index (SMI) to identify overbought and oversold conditions.

Usage

The indicator can be used to identify potential pivot points and trend reversals based on the relationship between the SMI line and its signal line. Users can monitor the shaded areas which indicate when the SMI has exceeded the user-defined overbought or oversold thresholds.

• Bullish Reversals: Look for the SMI signal line to cross above the EMA signal while in the oversold zone (below -50).
• Bearish Reversals: Look for the SMI signal line to cross below the EMA signal while in the overbought zone (above 50).
• Momentum Confirmation: Crosses between the two lines outside of extreme zones can suggest a continuation or shift in short-term momentum.

Details

The Krypton Fear & Greed indicator is built upon the Stochastic Momentum Index (SMI) calculation. Unlike the traditional Stochastic Oscillator which measures where the close is relative to the high-low range, the SMI measures where the close is relative to the midpoint of the high-low range.

The calculation involves:

1. Determining the distance of the current close from the midpoint of the n-period high-low range.
2. Smoothing this distance using a double Exponential Moving Average (EMA).
3. Normalizing the result to provide a value that oscillates between -100 and +100.

This approach results in a smoother oscillator that is often more responsive to price changes and provides clearer signals regarding overextended market conditions.

Settings

• Percent K Length: Sets the lookback period used to determine the highest high and lowest low for the SMI calculation.
• Percent D Length: Determines the smoothing period for the SMI and its signal line.
• Overbought: Defines the upper threshold level (default is 50) where the market is considered overextended to the upside.
• Oversold: Defines the lower threshold level (default is -50) where the market is considered overextended to the downside.

FAQ

How do I interpret the colored shaded areas?

The shaded areas appear when the SMI signal line crosses above the overbought level or below the oversold level. These areas highlight extreme sentiment where "Fear" (oversold) or "Greed" (overbought) may lead to a price reversal.

What do the two lines represent?

The green line is the primary SMI signal line, and the red line is a 4-period EMA of that signal. Crossovers between these two lines are often used as entry or exit triggers.

How can I access Krypton Fear & Greed?

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