If you're diving into the world of trading, you might have come across the Smoothed Momentum indicator. This tool helps traders gauge momentum trends in a more refined manner, enhancing your decision-making process.
Key Inputs of the Smoothed Momentum Indicator
The Smoothed Momentum indicator comes with five essential inputs:
- Momentum Period - This defines the calculation period for the momentum.
- Use Smoothing - A simple Yes or No option to decide if smoothing should be applied.
- Smoothing Period - This determines the length of the smoothing process.
- Smoothing Method - Choose the method for smoothing the data.
- Applied Price - This is the price level used for momentum calculations.
How It All Adds Up
Here’s a quick rundown of how the calculations work:
- If Use Smoothing is set to Yes:
Momentum = MA(Mom, Smoothing Period, Smoothing Method) - Otherwise:
Momentum = Mom
Where:
Mom = 100.0 * MA / PMA
MA = SMA(Applied Price, 1)
PMA = SMA(Applied Price) over the Momentum Period back
Visualizing the Smoothed Momentum
To give you a clearer picture, check out the following illustrations:
Fig. 1. Smoothed Momentum with Smoothing Enabled
Fig. 2. Smoothed Momentum without Smoothing
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