SMI Ergodic Indicator on Gold

What it shows

The blue SMI and the orange Signal share a pane below the candles. With the SMI above zero, the smoothed up changes are winning; where blue crosses orange, the push has changed side.

How Pravex works it out

Each candle contributes one number: its close minus the close before it.
Those changes get an EMA over the first smoothing length, and the result gets a second, quicker EMA over the second smoothing length.
Do the same to the absolute change, the change without its sign.
SMI = smoothed change ÷ smoothed absolute change, a ratio from -1 to +1. Unlike the True Strength Index, it is not multiplied by 100.
The orange Signal is a further EMA of that ratio, over the signal average length.
A made-up case to show the sum: smoothed change 0.2 over smoothed absolute change 0.8 gives an SMI of 0.25.

Settings

Setting	Default	What changing it does
First smoothing length	20	The first, slower EMA applied to the changes. A longer value gives a steadier line that turns later.
Second smoothing length	5	The second EMA applied on top of the first. A shorter value keeps more of the recent swings.
Signal average length	5	The EMA length of the orange line. At 5 it trails the SMI by only a few candles, so the two cross often; 10 or more spaces the crosses out.

How traders read it

Above zero says the smoothed up changes have outweighed the down ones. Below zero says the reverse. A reading near +1 or -1 means almost every smoothed change pointed the same way, which is rare.

Crosses are the usual trigger here. Blue rising through orange reads as momentum turning up, falling through it as turning down. With both lines this close in speed, expect plenty of them.

No fixed levels are drawn, only the zero line matters. To see the gap between blue and orange as bars, add the SMI Ergodic Oscillator.

When it misleads

Double smoothing delays the turn, so the SMI changes direction after price has already moved. In a sideways market on gold the line hovers near zero and crosses its Signal again and again, with no move behind it. A run of small candles pulls the ratio toward zero without any change in direction.

Questions and answers

Why does the SMI Ergodic Indicator start at 20, 5 and 5?

Those are the Pravex defaults: a slow first pass of 20, a quick second pass of 5 and a 5-candle signal. Raise the first pass for a steadier line that turns later; lower the signal for more crosses. Move one number at a time so you can see what each does.

SMI Ergodic Indicator vs True Strength Index?

The steps are the same. The TSI multiplies the ratio by 100 and starts at 25 and 13, while the SMI Ergodic Indicator stays between -1 and +1 and starts at 20 and 5.

Indicator or Oscillator: which SMI Ergodic should I add?

The Indicator draws the SMI and its Signal as two lines. The Oscillator draws the gap between them as a histogram around zero, which makes a cross easier to spot.

Is the SMI Ergodic Indicator the same as the Stochastic Momentum Index?

No. The Stochastic Momentum Index measures the close against the middle of the high-low range. This one smooths the price change itself.