January 2021 Newsletter – Learn How to Build Complex Indicators – Without Programming

ESignal Data Feed May Be Discontinued

We have heard from several customers that ESignal is planning on discontinuing the use of their data in third party software such as NeuroShell Trader. We have tried to contact ESignal about the date when data will no longer be available, but we have not gotten a definitive answer.

We suggest that if you are currently using the ESignal datafeed that you contact them to see how this will affect your personal account.

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Learn How to Build Complex Indicators –
Without Programming

Combine Standard Indicators to Capture Multifaced Concepts

The Professional and Power User versions of NeuroShell Trader give you the ability to create custom indicators by simply combining existing indicators.  For ease of us on future charts, custom indicators may be named and parameters may be mapped together.  Learn more here.

New users often mention this as one of the “WOW” features in the Trader compared to other trading systems.

This article will walk you through the steps needed to create the Stochastic Momentum Index.

What is the Stochastic Momentum Index (SMI)?
Both the standard Stochastic indicators and the Stochastic Momentum Index (SMI) indicate momentum in the market. The Stochastic %D, %K and Slow %D indicators from the Trader’s Price Momentum Category are based on the close while the SMI looks at the range between the high and low as well as the close.

SMI is used with volume indicators to gauge whether the buying/selling pressure is real. Traders also use the SMI as a general trend indicator, interpreting values above 40 as indicative of a bullish trend and negative values greater than -40 as showing a bearish trend.

Build the Stochastic Momentum Index in 8 Steps
We’re using the bottom-up method that creates the individual parts of the formula and combines those pieces into the final indicator.

Each step is included as a separate indicator on our example chart, which you can download here.  Note that once you open this chart, the Stochastic Momentum Index indicator will be saved in the Custom Indicator category in NeuroShell Trader.

To view the original formula, click here.

Step 1 – Create the High/Low Midpoint
The textbook formula defines the midpoint as the (max high value + low min value)/2

A. Select division from the Arithmetic category.
B. Numerator = add2, Arithmetic category.
Operand #1 = Max Value, Basic category. Parameters are High and 10 periods.
Operand #2 = Min Value, Basic category. Parameters are Low and 10 periods.
C. Denominator = 2

Step 2 – Close Minus High/Low Midpoint
Subtract the Close from the High/Low Midpoint

A. Select subtract from the Arithmetic category.
Operand #1 = close
Operand #2 = High/Low Midpoint

Step 3 – Exponential Moving Average of Close Minus Midpoint
Use 3 period Exponential Moving Average to smooth the result of the Close Minus High/Low Midpoint

A. Select Exponential Moving Average from Averages category.
Time Series = Close – High/Low Midpoint
ExpAvg Periods = 3

Step 4 – Double Smooth the Close Minus High/Low Midpoint
Apply another 3 period Exponential Moving Average to smooth the result of Step 3.

A. Select Exponential Moving Average from Averages category.
Time Series = ExpAvg(3) of Close Minus Midpoint
ExpAvg Periods = 3

Step 5 – Exponential Moving Average of MaxHigh Minus MinLow
This step uses an Exponential Moving Average to smooth the MaxHigh Minus the MinLow.

A. Select Exponential Moving Average from Averages category.
Time Series = Sub(Max(High,10), Min(Low,10)) [Use Subtract from Arithmetic category, Max/Min Value over 10 periods from Basic category]
ExpAvg Periods = 3

Step 6 – Double Smooth MaxHigh Minus MinLow
Smooth the results of Step 5 with another 3 period Exponential Moving average.

A. Select Exponential Moving Average from Averages category.
Time Series = ExpAvg(3) of ExpAvg of (Sub(Max(High, 10), Min(Low,10))
ExpAvg Periods = 3

Step 7 – Divide the double smoothed Close Minus Midpoint by the double smoothed MaxHigh Minus the MinLow
Divide both double smoothed indicators.

A. Select Divide from the Arithmetic Category
Numerator = result of Step 4
Denominator = result of Step 6

Step 8 – Create the Stochastic Momentum Index
Multiply the result of Step 7 by 100 to generate the final indicator as a percentage.

A. Select Multiply 2 from the Arithmetic Category
Operand 1 = result of Step 7
Operand 2 = 100

For more information on building custom indicators in NeuroShell Trader, visit our tech support web site:

Bottom-Up Method

Top-Down Method

 

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