# 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')

```

## Comentarios

I think there is an error in your code. In Line 21, please check whether you need to use EMA function again. Plotting should be for SMI only. SMI signal calculation is superfluous as you have the EMA signal calculation in Line 22. Further the EMA signal for SMI the smoothing length is hard coded (10). This may not be apparent to the user.
Responder
Would you plz share the backtest script ?
Responder
Does it work
Responder
HI Surjit,

I am new to trading. I just started on trading view. I found your SMI indicator quite good. But just yesterday the earlier script was changed. I found a new indicator running on the chart with the same title. Could you please let me know how I could revert back to the earlier script. thanks Ram
Responder
thank u sir. nice
Responder
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
Responder
joaomoreira11
@joaomoreira11, You are correct. The coloring is inverted.
Responder
joaomoreira11
@joaomoreira11, Well, oversold at the bottom and overbought at the top. Color is irrelevant
Responder
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" .
Responder