Description

Developed by William Blau, Stochastic is a momentum indicator.

• It is similar to stochastic except that the value of SMI can range from +100 to -100.
• It is a momentum indicator that shows the location of the current close relative to the midpoint of high/low range over the last n-time periods
• The values range from 0 to 100%
• In order to smoothen it, Moving Average (MA) of Stochastic is calculated which is known as Stochastic %D

Interpretation

• Readings below -50 considered as oversold
• Readings over +50 considered as overbought
• It compares distance of Last rate from its mid-point of recent High & low range and so value can be negative or positive
• %K cutting %D is also used for crossover signals

Default Parameters Used/Inputs

• High Line
• Low Line
• Close Line
• Pcnt K Bars
• Smoothing Bars
• Dbl Smoothing Bars
• Avg Type
• Pcnt D Bars

Returns/Output

Stochastic value of the stock for the specific period.

Formula

SMI = (CM *2) / HL
Where ,
HL = EMA (EMA (Highest High – Lowest Low) )
CM = EMA {EMA [Close – ((highest high – Lowest Low) /2) ] }