Partition regularity: Difference between revisions
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The | The '''mass index''' is an indicator, developed by [[Donald Dorsey]], used in [[technical analysis]] to predict trend reversals. It is based on the notion that there is a tendency for reversal when the price range widens, and therefore compares previous trading ranges (highs minus lows). | ||
Mass index for a commodity is obtained<ref>[http://www.incrediblecharts.com/technical/mi_construction.htm Mass Index construction] at IncredibleCharts.com</ref> by calculating its [[moving average (finance)#Exponential moving average|exponential moving average]] over a 9 day period and the exponential moving average of this average (a "double" average), and summing the ratio of these two over a given amount of days (usually 25). | |||
: <math>Mass = Sum[25] \; of \; { EMA[9] \; of \; (high-low) \over EMA[9]\,of\,EMA[9] \; of \; (high-low) }</math> | |||
Generally the EMA and the re-smoothed EMA of EMA are fairly close, making their ratio is roughly 1 and the sum around 25. | |||
According to Dorsey, a so-called "reversal bulge" is a probable signal of trend reversal (regardless of the trend's direction).<ref>[http://www.incrediblecharts.com/technical/mass_index.htm Mass Index] at IncredibleCharts.com</ref> Such a bulge takes place when a 25-day mass index reaches 27.0 and then falls to below 26 (or 26.5). A 9-day prime moving average is usually used to determine whether the bulge is a buy or sell signal. | |||
This formula uses intraday range values: not the "true range," which adjusts for full and partial gaps. Also, the "bulge" does not indicate direction. | |||
== References == | |||
<references/> | |||
{{finance-stub}} | |||
{{technical analysis}} | |||
[[Category:Technical indicators]] | |||
Revision as of 13:59, 19 April 2013
The mass index is an indicator, developed by Donald Dorsey, used in technical analysis to predict trend reversals. It is based on the notion that there is a tendency for reversal when the price range widens, and therefore compares previous trading ranges (highs minus lows).
Mass index for a commodity is obtained[1] by calculating its exponential moving average over a 9 day period and the exponential moving average of this average (a "double" average), and summing the ratio of these two over a given amount of days (usually 25).
Generally the EMA and the re-smoothed EMA of EMA are fairly close, making their ratio is roughly 1 and the sum around 25.
According to Dorsey, a so-called "reversal bulge" is a probable signal of trend reversal (regardless of the trend's direction).[2] Such a bulge takes place when a 25-day mass index reaches 27.0 and then falls to below 26 (or 26.5). A 9-day prime moving average is usually used to determine whether the bulge is a buy or sell signal.
This formula uses intraday range values: not the "true range," which adjusts for full and partial gaps. Also, the "bulge" does not indicate direction.
References
- ↑ Mass Index construction at IncredibleCharts.com
- ↑ Mass Index at IncredibleCharts.com