Stochastic Momentum Index (SMI) Indicator Explained

William Blau's Stochastic Momentum Index (SMI) refines the stochastic: instead of asking where the close sits between the range's high and low, it measures the close's distance from the range's midpoint, double-smoothed. The result is centered at zero and far less jittery than raw %K.

How It Works

• Distance of close from the high-low midpoint, double-EMA smoothed, normalized to ±100.
• Above +40: strongly overbought; below −40: strongly oversold.
• A signal line enables MACD-style crossovers.

How to Trade It

Trade SMI/signal crosses in the direction of the larger trend, or fade ±40 extremes in ranges. Its centered scale makes divergence detection cleaner than the 0–100 stochastic: compare the sign and height of successive extremes directly.

Building It in Setup.Cash

Add Stochastic Momentum Index (SMI) in the strategy builder — the length input controls its sensitivity — and use its value in any entry, exit, or filter condition. You can also combine it with other tools in the Indicators Lab or via the AI indicator generator. See the classic Stochastic Oscillator for the original. For the full category overview, see the advanced momentum library guide.

Momentum signals are timing tools — combine them with a trend or regime filter and backtest the exact rules before going live.