Custom Stochastic Momentum Index with Zero-Crossing Signals

Summary

This document describes a customizable stochastic momentum index (SMI) that compares the close with the midpoint of the recent high-low range. It smooths that distance and the range with two exponential averages, then produces a further averaged signal line. The code also plots reference levels at zero and at the upper and lower bounds.

The suggested approach treats an upward cross of zero as a buy signal and exits when the indicator falls below a chosen threshold, with 50 offered as an example. That exit level is adjustable. The document provides the indicator formula and suggested signal logic, but no chart examples, backtest, performance results, or detailed rules for short trades. It also notes that the indicator is a customized variant rather than the classical SMI. Its usefulness therefore depends on parameter choices, market, and testing; the example alone does not establish profitability.

Key ideas

• The indicator measures smoothed price distance from the midpoint of a rolling high-low range.
• It applies exponential smoothing to both the price displacement and the range used for normalization.
• The suggested buy signal occurs when the indicator crosses above zero.
• An example exit is a fall below 50, and the threshold can be changed.
• The document supplies no performance evidence for the proposed signals.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.