The Intraday Momentum Index was developed by Tushar Chande. A combination of the Relative Strength Index and Candlestick Analysis gives the Intraday Momentum Index.
The IMI calculation is similar to RSI, but there lies a difference. The intraday opening and closing prices relationships are used here in order to find out if the day is up or down. An up day means that the close is higher than the open. It is signified by white candlesticks. A down day means that the close is lower than the open and it is signified by black candlesticks.
As well as RSI, the index rise over 70 indicates overbought conditions, that mean lower prices in future. Index values lower than 30 mean a possibility of oversold situation that is followed by higher prices. You should estimate the forex market trendiness using all overbought/oversold indicators before taking any actions on an signals.
The Intraday Momentum Index (IMI) is the same formula as the Relative Strength Index (RSI), except intraday differences are used as input. In otherwords, while the RSI uses the day-to-day change as input, the IMI uses the difference between the high and low values for the day. The IMI was designed by Tushar Chande.
The only parameter used with the IMI on StockFetcher is the period. The period is used within the RSI-based formula. Additionally, the results from the IMI measure are scaled between 0 and 100.
The Intraday Momentum Index is an oscillator which is constructed by averaging n day’s worth of upward price changes (close is greater than open) to n day’s worth of downward price changes (close is less than open). Sell signals are issued when the index crosses above the overbought level of 70% and buy signals are issued buy signals are issued when the index crosses below the oversold level of 30%.
The Intraday Momentum Index takes one input parameter which is the number of periods used to construct the up and down price change averages.