Stochastic Momentum Index (SMI) Quiz: Test Your Knowledge

Question 1

What does the stochastic momentum index measure that sets it apart from the classic stochastic oscillator?

Accepted Answer

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

Question 2

Why does the SMI produce a smoother, calmer line than a plain stochastic?

Accepted Answer

It applies double smoothing to the calculation before scaling it

Question 3

The SMI pushes above plus 40. What does that reading tell you on its own?

Accepted Answer

The market is closing near the top of its range, a condition often called overbought, but it is not a sell signal by itself

Question 4

When does an SMI signal line crossover carry the most weight?

Accepted Answer

When it happens from an extreme, such as a cross up from below minus 40

Question 5

Price makes a higher high but the SMI makes a lower high. What is this telling you?

Accepted Answer

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

Question 6

Is the SMI simply a better indicator than the classic stochastic?

Accepted Answer

No; it is smoother with cleaner divergences, but that costs a little lag, so it is not automatically better

Question 7

What is the shared weakness of the SMI and every other momentum oscillator?

Accepted Answer

In a strong trend it can read overbought or oversold and simply stay there, and it knows nothing about price level, pattern or session