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Creator: Donald Dorsey
EMI period: 20
MI period: 25
Average period: 10
There are 2 different lines plotted below the chart for the Mass Index indicator.
1 – Green line represents Mass Index
2 – Red line represents the Average
The Mass Index is a volatility indicator based on range expansions to identify trend reversals. To provide a smoother measure of volatility, the Mass Index makes use of the high-low differential.
Indicators typically fluctuate around 20. Whenever the indicator is near the high point of its historical range, it indicates an increase in volatility. This is an indication of a trend reversal.
Dorsey believes that when the indicator falls below 27 after crossing it, volatility has peaked. It is a potent signal that indicates a reversal of the current trend. The mass index does not take trend into account.
In order to measure volatility and develop trend reversal strategies, the Mass Index is a very useful indicator.
The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.
This indicator is also available in the System Builder of RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.
The indicator is applicable to all types of charting. Calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin ashi charts, and lines on Kagi charts. While the formula and reading of the indicators remain the same, they become more dynamic on these charts.