Mass Index [Mass]

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The Mass Index function determines the volatility of a financial data series using the ratio of two moving averages of the high versus low price over a given time. Parameters ------------------ High          The high price of the security for each given day. Low           The low price of the security for each given day. Period        The number of bars of data to include in the calculation, including the current value.                   For example, a period of 3 includes the current value and the two previous values.                   Note that the values including the calculation take into account the previous 16 days of data.                   Therefore, the actual number of days included in the calcuation is about 16 more than the period. Note that while this function is intended for use with these specific values, any values can be used for these parameters, including other price values and averaged prices. Indicator Value ------------------------ The Mass Index was designed to detect changes in the difference between the high and low prices. It uses a 9-day exponential moving average and a 9-day exponential moving average of a 9-day exponential moving average of this difference in a sum over the given period. Since it uses a sum of values, the value at the beginning of a data series is not defined until there are enough values to fill the given period. In addition, since it uses multiple 9-day exponential moving averages, you may want to ignore the first 16 values after the given period has filled. Note that since the Mass Index uses a summation rather than a moving average, different periods produce different ranges of values. Usage ----------- The most significant pattern for this indicator is a "reversal bulge". The reversal bulge occurs at the end of periods of extended volatility and typically indicates when a reversal in the price trend is about to occur. A reversal bulge is said to occur when a 25-day Mass Index rises above 27 and then falls below 26.5. The direction that the price will change to is typically opposite that of a 9-day exponential moving average. For example, if the average is currently increasing, a sell signal would be generated in anticipation of a reversal in price. See the sample entry/exit systems for an example using the Mass Index to detect a reversal bulge. Source ------------ This indicator is based on an entry in "Technical Analysis From A To Z" by Steven B. Achelis. It was originally developed by Donald Dorsey.