SMI Ergodic

Name Type Prerequisite Use Cases
SMI Ergodic Indicator (SMI) Momentum EMA Providing smoother, more reliable signals than standard Stochastics.

Definition

The SMI Ergodic Indicator (Stochastic Momentum Index) is a double-smoothed variation of the True Strength Index (TSI). It is used to spot trend direction and reversals. It includes a signal line for crossovers.

Mathematical Equation

Derived from the Stochastic Momentum Index (SMI):

\[ SMI = \frac{\text{DoubleSmooth}(Close - \frac{High+Low}{2})}{\text{DoubleSmooth}(\frac{High-Low}{2})} \]

The Ergodic version typically uses specific smoothing periods suitable for trend following.

Special cases

  • Maximum possible value: Unbounded
  • Minimum possible value: Unbounded
  • Behavior: Oscillates around zero, smoothing momentum to clarify overbought and oversold readings.

Visualization

SMI Ergodic

Trading Significance

  1. Crossovers:

    • Buy: SMI (Main) crosses above Signal line.

    • Sell: SMI (Main) crosses below Signal line.

  2. Zero Line: Crossing zero confirms trend direction.