Rule #6: How to use a Stochastic Momentum Indicator …

Recommendations on using a Stochastic Momentum Indicator …

I like using the Stochastic-Momentum indicator in certain instances because it can often give you a much clearer picture than just using a Stochastic indicator.

Some refer to this indicator as the SMI and they use the same trading rules as they use with the Stochastic Oscillator.

Today, we will apply the Stochastic-Momentum indicator on a Weekly chart of the 30 year bond  yields.  Used on a weekly is intended to catch the big moves, not short term moves like in January, February, and March of 2010.

To use it on a weekly TYX chart, we like to use the following settings:
–  The %K set at 14,9,9  … and the %D at 3.

As you can see, in spite of all the Fed interference with interest rates, the Stochastic-Momentum indicator can give very helpful trending information for investors.  As you can see below, for the past fewyears, the Stochastic-Momentum indicator has done a very admiral job on the TYX.