Stochastic Momentum Index Quiz: Test Your Knowledge

Question 1

What does the stochastic momentum index actually measure?

Accepted Answer

Where the current close sits relative to the midpoint of the recent high to low range

Question 2

How does the SMI differ from the classic stochastic in what it references?

Accepted Answer

It measures the close against the midpoint of the range rather than the bottom

Question 3

What is the signal line on the SMI?

Accepted Answer

A short moving average of the SMI line, around three periods, used to time shifts

Question 4

The SMI pushes above plus 40 during a strong uptrend. What is the sensible read?

Accepted Answer

It flags an overbought condition, but a strong trend can hold it there, so it is not a sell signal on its own

Question 5

Price makes a higher high but the SMI makes a lower high. What does this suggest?

Accepted Answer

Momentum is fading even as price pushes on, which often comes before a turn

Question 6

What is the main trade-off when choosing the SMI over the classic stochastic?

Accepted Answer

The SMI is smoother with fewer whipsaws, but its extra smoothing adds a little lag

Question 7

What is the honest limit of the SMI as a momentum oscillator?

Accepted Answer

It describes momentum but knows nothing about the price level, pattern or session, so it needs context