# Stochastic Momentum Index (SMI)

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Stochastic Momentum Index (SMI) or Stoch MTM is used to find oversold and overbought zones. It also helps to figureout whether to enter short trade or long trade.

Red Shade in the Top indicates that the stock is oversold and the Green shade in the bottom indicates overbought.

Strategy:

Enter Long once the Overbought Zone ended and there's a crossover below -35.
Exit Long once the oversold zone is ended and there's a crossover.

Enter Short once the oversold zone is ended and there's a crossover above 35.
Exit Short once the Overbought Zone ended and there's a crossover.

Backup: Always use with another indicator because there will be multiple up and down movement in one Trend.
```//@version=2
//Stochastic Momentum Index
// Author: Surjith S M (India)
//Thanks UCSgears, lonestar108
study("Stochastics Momentum Index", shorttitle = "Stoch_MTM")
a = input(10, "Percent K Length")
b = input(3, "Percent D Length")
ob = input(40, "Overbought")
os = input(-40, "Oversold")
// Range Calculation
ll = lowest (low, a)
hh = highest (high, a)
diff = hh - ll
rdiff = close - (hh+ll)/2

avgrel = ema(ema(rdiff,b),b)
avgdiff = ema(ema(diff,b),b)
// SMI calculations
SMI = avgdiff != 0 ? (avgrel/(avgdiff/2)*100) : 0
SMIsignal = ema(SMI,b)
emasignal = ema(SMI, 10)

h0 = hline(40)
h1 = hline(-40)

//Color Definition for Stochastic Line
//col = SMI >= 40 ? green : SMI <= -40 ? red : black

plot(SMIsignal, title="Stochastic", style=line, color=black)

plot(emasignal, title="EMA", style=line, color=red)

level_40 = 40
level_40smi = SMIsignal > level_40 ? SMIsignal : level_40

level_m40 = -40
level_m40smi = SMIsignal < level_m40 ? SMIsignal : level_m40

p1 = plot(level_40)
p2 = plot(level_40smi)

p3 = plot(level_m40)
p4 = plot(level_m40smi)

fill(p1, p2, color=red, transp=40, title='OverSold')

fill(p3, p4, color=green, transp=40, title='OverBought')

```

Surjithctly states: "Red Shade in the Top : stock is oversold. Green shade in the bottom : overbought. "
Inspecting UCS_SMI and RSI it seems to me it is the opposite
If I`m wrong excuse me
JM
joaomoreira11
@joaomoreira11, You are correct. The coloring is inverted.
joaomoreira11
@joaomoreira11, Well, oversold at the bottom and overbought at the top. Color is irrelevant
joaomoreira11
@joaomoreira11 @algrus this is not a clear oversold/overbought indicator. Its best used for crossovers for potential buy or sell signals. Its NOT good as a standalone, but its very good for momentum. A crossover/crossunder is not always a good signal cause it depends on WHERE it crossed, much like stochRSI. Imo, its a combo of StochRSI (more accurate) and slow stoch more responsive). Also check for DIVS in between different crosses, just like every DIV it works best on oversold/overbought areas.

Color filling is not inverted. Its green as "safe to buy" and red as "be careful" .