The Mass Index is a technical indicator used in trading to identify potential trend reversals by detecting changes in the price range and volatility. Donald Dorsey introduced it in the technical analysis book "The Mass Index" in the early 1990s. The indicator measures the range between high and low prices over a specified period, typically 9 and 25, and then calculates an exponential moving average. The resulting value is then divided by the 25-period EMA to produce the Mass Index. Traders use the Mass Index to identify potential price reversals when the indicator crosses above or below a certain threshold, typically 27. When the Mass Index crosses above 27, it suggests a potential reversal is imminent, while a cross below 26 suggests a potential continuation of the current trend.
Mass Index - Technical Analysis from A to Z
The Mass Index was designed to identify trend reversals by measuring the narrowing and widening range between high and low prices. As this range widens, the Mass Index increases; as the range narrows, the Mass Index decreases. Donald Dorsey developed the Mass Index. According to Mr. Dorsey, the most significant pattern to watch is a "reversal bulge." A reversal bulge occurs when a 25-period Mass Index rises above 27.0 and subsequently falls below 26.5. A reversal in price is then likely. The overall price trend (i.e., trending or trading range) is unimportant.
Mass Index - Technical Analysis from A to Z