T3 Stochastic Momentum Index:
The Stochastic Momentum Index (SMI) was developed by William Blau
and was introduced in the January 1993 issue of Technical Analysis of
Stocks & Commodities magazine.
It incorporates an interesting twist on the popular Stochastic
Oscillator. While the Stochastic Oscillator provides you with a value
showing the distance the current close is relative to the recent
x-period high/low range, the SMI shows you where the close is relative
to the midpoint of the recent x-period high/low range.
This version is doing the calculation in the same way as the original Stochastic Momentum Index,
except in one very important part: instead of using EMA (Exponential
Moving Average) for calculation, it is using T3. That produces a
smoother result without adding any lag.
Author: Mladen Rakic