Mass Index

[Leth]

Mass Index

The Mass Index attempts to predict reversals by comparing the trading range (High minus Low) for each period. Reversals are signaled by a bulge in the index line.

The Mass Index was invented by Donald Dorsey.

Trading Signals

The key signal is a reversal bulge. This occurs when the Mass Index (25 period) rises above 27 and falls back below 26.5.

Calculate a 9 day exponential moving average (EMA) of prices:

-Go long if there is a reversal bulge and EMA points downward.
-Go short if there is a reversal bulge and EMA points upward.
-Use Trailing Stops to time your entry and Stop Loss Orders on all trades.

Example

FedEx with a Lavender 25 day Mass Index, and Lavender 9 day exponential moving average.

fdx%20mass%20index.png

Reversal bulges are very infrequent:

Long signal - Mass index completes a reversal bulge at [1] while the moving average slopes downward. Place a trailing buy-stop above the High of the signal day and move it down above the high of each day until we are stopped in at [L].

Setup

The default settings are:

indicator window - 25 days
upper level - 27.0
lower level - 26.5