Stochastic Momentum Index Indicator
The Stochastic Momentum Index Indicator is one of those tools that looks fairly simple at first, but becomes more interesting once you start watching how it behaves next to price. Sometimes the chart is still moving strongly in one direction while the SMI has already started to slow down or turn. The indicator shows the SMI together with a signal line, so you can quickly see when momentum begins to shift. The color changes help as well, especially when you are scanning a chart and do not want to stare at two lines trying to work out which one is leading. The +40 and -40 levels give some extra context, but I would not treat them as automatic reversal zones. What I like most is when the indicator starts disagreeing with what the chart seems to be saying. Price can still look strong while momentum becomes less convincing underneath. It does not mean the move has to end, but it is often enough to make you stop for a second and look more closely at what is actually happening.