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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).

Mass = Sum[25] \; of \; { EMA[9] \; of \; (high-low) \over EMA[9]\,of\,EMA[9] \; of \; (high-low) }

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 Edit

  1. Mass Index construction at IncredibleCharts.com
  2. Mass Index at IncredibleCharts.com


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