Relative Momentum Index [RMI]

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The Relative Momentum Index function determines the internal momentum of a field using the number of upward and downward price changes across a given number of bars over a given period of time. Parameters ------------------ Data                       The data to use in the calculation. This is typically a field in a data series or a calculated value. Smoothing Period   The number of bars of data to include in the calculation, including the current value.                                For example, a period of 3 uses the changes for the current bar and the two previous bars. Momentum Period  The number of bars of data to include in the momentum, not including the current value.                                For example, a period of 3 compares the current value to the value three bars ago. Indicator Value ------------------------ The Relative Momentum Index is based on a ratio of the average upward changes to the average downward changes over a given period of time. The individual changes are calculated for the given number of days. This is an extension of the Relative Strength Index, which uses a momentum period of 1 to calculate day-to-day changes. The function has a range of 0 to 100 with values typically remaining between 30 and 70. Higher values indicate overbought conditions while lower values indicate oversold conditions. The Relative Momentum Index at the beginning of a data series is not defined until there are enough values to fill the momentum for the given period, or a number of bars equal to the sum of the periods.. In addition, the value is defined as 100 when no downward changes occur during the given period. Usage ----------- The Relative Momentum Index (RMI) is typically used with a 9, 14, or 25 calendar day (7, 10, or 20 trading day) smoothing period against the closing price of a security or commodity. The more days that are included in the calculation, the less volatile the value. The momentum period can also be used to reduce the volatility of the value. The RMI is analyzed in the same way the Relative Strength Index (RSI). It usually leads the price by forming peaks and valleys before the price data, especially around the values of 30 and 70. In addition, when the RSI diverges from the price, the price will eventually correct to the direction of the index. See the sample entry/exit systems for an example using the Relative Momentum Index. Source ------------ This indicator was developed by Roger Altman and was introduced in the February 1993 issue of "Technical Analysis of Stocks & Commodities" magazine. The RSI was developed by J. Welles Wilder and is discussed in his book "New Concepts in Technical Trading".