intraday momentum index

On top of those, variations exist with smoothing techniques on resultant values, averaging principals and combinations of various indicators. An options trader should select the indicators best suited to his or her trading style and strategy, after carefully examining the mathematical dependencies and calculations. The stochastic oscillator compares the close prices of particular security with the highest and lowest prices, the high low range, over a specific period. However, traders often encounter problems due to the stochastic oscillator price sensitivity to closing price causing price fluctuations, leaving some traders looking for solutions. The intraday Momentum Index helps us to show the market trend by measuring the candlestick open and closing price.

intraday momentum index

Stochastics is used to show when a stock has moved into an overbought or oversold position. Depending on the technician’s goal, it can represent days, weeks, or months. For a long-term view of a sector, the chartist would start by looking at 14 months of the entire industry’s trading range.

Indicator: Intrady Momentum Index

The stochastic momentum index (SMI) is a technical analysis indicator that shows price momentum by calculating its closing price distance relative to its median high-low price range. The SMI attempts to improve upon the traditional stochastic oscillator. The Intraday Intensity Index is typically available through advanced charting software. The Intraday Intensity Index is a volume-based technical indicator that integrates volume with a security’s price.

  • He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
  • But, you can use methods to filter out lower probability SMI crossover trades.
  • The IMI can also be used in conjunction with other technical indicatorsTechnical indicators are mathematical calculations based on the price and/or volume of an asset.
  • Seeking professional advice is recommended to gain a deeper understanding of the IMI and its application in trading.

Feel free to experiment with the settings and parameters to fit your personal preferences. The primary plot is accompanied with Overbought and Oversold levels (by default, 70 and 30 percent, respectively). Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others.

A tug of war: Overnight versus intraday expected returns

The signal line crossover is arguably the most straightforward use of this indicator. To find buy and sell signals, all traders have to do is watch the relationship between the two lines %K (k line) and %D (d line). The “slow” stochastic, or %D, is computed as the 3-period moving average of %K. When the indicator line breaks and stays above the 70.00 level, the price is considered to be bullish, but also overbought. Similarly, when the line breaks and stays below the 30.00 level, the price is considered to be bearish, but also oversold. When the result of calculations is lower than 30, the asset is considered to be oversold.

intraday momentum index

By using this neutral zone, you make it more likely that you will be able to stay in profitable trades longer and not take actions near the zero line. This trading method presents a huge number of potential trades, resulting in a lower win percentage (the number of profitable trades divided by the total number of trades). Stochastics is a favorite technical indicator because of the accuracy of its findings.

Best Practices in Using Intraday Momentum Index

Technical/Fundamental Analysis Charts & Tools provided for research purpose. Please be aware of the risk’s involved in trading & seek independent advice, if necessary. Because momentum leads price, you should trade with the indicator and not price movement, expecting a trend reversal using support and resistances as your guide.

It is one of the technical indicators that can be helpful when deciding on the best time to open a trading position. The IMI should not be used in isolation but rather as part of a comprehensive trading strategy that incorporates other technical indicators, fundamental analysis, and risk management techniques. A divergence between these volume-based indicators and the IMI could signal potential trading opportunities. Traders often use the IMI in conjunction with moving averages to confirm trends and generate trade signals.


The investor needs to watch as the D line and the price of the issue begin to change and move into either the overbought (over the 80 line) or the oversold (under the 20 line) positions. The investor needs to consider selling the stock when the indicator moves above the 80 levels. Conversely, the investor needs to consider buying an issue that is below the 20 line and is starting to move up with increased volume. IMI combines some features of the relative strength index, through the relationship between up closes and down closes and whether there is an indication that a security is overbought or oversold, through candlestick charts. The numerator subtracts the security’s high and low from two times the most recent closing price.

The Money Flow Index is a momentum indicator that combines price and volume data. Since options are subject to time decay, the holding period takes significance. intraday momentum index A stock trader can hold a position indefinitely, while an options trader is constrained by the limited duration defined by the option’s expiration date.